SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.  20549

                                 FORM 10-K

(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

     For the fiscal year ended December 31, 1997

                                    OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

     For the transition period from           to

Commission File
Number 0-7288

                  INTERCONTINENTAL LIFE CORPORATION
       (Exact name of registrant as specified in its charter)

     Texas                   22-1890938
(State of Incorporation)  (I.R.S. Employer identification number)

701 Brazos, Suite 1400, Austin, Texas                       78701
(Address of Principal Executive Offices)               (Zip Code)

                        (512)  404-5000
                      (Registrant's Telephone Number)

     Securities Registered pursuant to Section 12(b) of the Act: None

        Securities Registered pursuant to Section 12(g) of the Act:

                  Common Stock, $.22 par value
                             (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90
days.

YES   X    NO

The aggregate market value of the voting stock held by
non-affiliates of the Registrant on March 16, 1998, based on the
closing sales price in The Nasdaq Small-Cap Market ($21.25 per
share), was $48,056,663.

As of March 16, 1998, Registrant had 4,343,335 shares of its Common
Stock outstanding (excluding shares held in Treasury and not
entitled to vote).

Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulations S-K is not contained herein, and will
not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

                                  PART I

Item 1. Business

General

InterContinental Life Corporation ("ILCO", the "Company" or the
"Registrant") was originally incorporated in 1969 under the laws of
the State of New Jersey. During 1997, ILCO transferred its domicile
from New Jersey to the State of Texas.  This change was approved by
vote of the shareholders at the annual meeting of shareholders held
on June 19, 1997.  Its executive offices are located at 701 Brazos,
Suite 1400, Austin, Texas 78701.

The Company is principally engaged, through its subsidiaries, in
administering existing portfolios of life insurance policies,
credit life and credit disability insurance policies and annuity
products. Prior to the end of 1997, the life insurance subsidiaries
also administered an in-force book of accident and health insurance
business. In December, 1997, the life insurance subsidiaries
entered into an agreement, effective as of June 30, 1997, with a
third party insurer whereby the obligations under the accident and
health insurance and the disability income business of the
companies was assumed by the reinsurer.  The arrangement provides
for an initial period of a reinsurance on a coinsurance basis,
pending applicable approvals of the assumption arrangement.

The Company's insurance subsidiaries are also engaged in the
business of marketing and underwriting individual life insurance
and annuity products in 49 states and the District of Columbia.
Such products are marketed through independent, non-exclusive
general agents.

The Company is controlled by Financial Industries Corporation
("FIC"), a life insurance holding company, through FIC's ownership
of approximately 45.40% of the Company's outstanding Common Stock.
FIC also holds options to acquire additional shares, which, if
exercised, would result in FIC's owning approximately 60.80% of the
Company's outstanding shares. FIC, ILCO and their insurance
subsidiaries have substantially identical managements, and a
majority of the directors of ILCO are also directors of FIC and
ILCO's and FIC's insurance subsidiaries.  Officers allocate their
time between ILCO and FIC in accordance with the comparative
requirements of both companies and their subsidiaries.  Roy F.
Mitte, Chairman, President and Chief Executive Officer of FIC, the
Company and their insurance subsidiaries, is the beneficial owner
of approximately 34% of the outstanding shares of FIC's common
stock. FIC owns Family Life Insurance Company, a Washington
domiciled underwriter of mortgage protection life insurance.

The Company was organized in 1969 to be the publicly owned holding
company for InterContinental Life Insurance Company ("ILIC"). The
Company acquired Standard Life Insurance Company ("Standard Life")
in 1986, Investors Life Insurance Company of California
("Investors-CA") and Investors Life Insurance Company of North
America ("Investors-NA") in 1988,  Meridian Life Insurance Company,
renamed Investors Life Insurance Company of Indiana
("Investors-Indiana"), in February 1995, and State Auto Life
Insurance Company (via merger of that company into Investors-
Indiana in 1997).


Acquisitions

Strategy. The Company's strategy has been and continues to be to
grow internally and through acquisitions, while maintaining an
emphasis on cost controls. Management believes that, under
appropriate circumstances, it is more advantageous to acquire
companies with books of in-force life insurance than to produce new
business, because initial underwriting costs have already been
incurred and mature business is generally less likely to terminate,
making possible more predictable profit analysis. However, the
Company's insurance subsidiaries do continue to market those
products that are profitable, as well as develop new products and
streamline distribution channels. See "Agency Operations". It is
also management's belief that the continuing consolidation in the
life insurance industry presents attractive opportunities for the
Company to acquire life insurance companies that complement or fit
within the Company's existing marketing structure and product
lines. The Company's objective is to improve the profitability of
acquired businesses by consolidating and streamlining the
administrative functions of these businesses, eliminating
unprofitable products and distribution channels, applying its
marketing expertise to the acquired company's markets and agents,
and benefitting from economies of scale. The Company's ability to
make future acquisitions will be dependent on its being able to
obtain the necessary financing. In addition, since FIC has the same
acquisition strategy as ILCO, a conflict of interest could arise in
the future between ILCO and FIC with respect to acquisition
opportunities.

Acquisition of Standard Life. In November 1986, the Company
acquired Standard Life, headquartered in Jackson, Mississippi, for
a gross purchase price of $54,500,000. A portion of the funds used
by the new life insurance company formed by the Company to make the
acquisition ("New Standard") was the proceeds of a loan extended to
the Company by a national bank in the principal amount of
$15,000,000 (the "Standard Term Loan"). This sum was, in turn,
loaned by the Company to New Standard, and the loan was evidenced
by a surplus debenture. New Standard was merged into Standard Life
in June 1988.

Acquisition of Investors-NA and Investors-CA. In December 1988, the
Company, through Standard Life, purchased Investors-CA and
Investors-NA from CIGNA Corporation for a purchase price of $140
million.  The Company obtained the funds used for the acquisition
from: (a) a senior loan in the amount of $125,000,000 (maturity
date December 31, 1996, payable in twenty -seven quarterly
installments of $4 million each, commencing on July 1, 1989,
followed by four quarterly installments of $4.25 million each)
provided by six financial institutions (the "Senior Loan"), (b) a
$10,000,000 subordinated loan (a nine-year note, with an interest
rate of 13.25%) provided by two insurance and financial service
organizations and (c) the sale of $5,000,000 of Class A Preferred
Stock (principal amount of $5 million; dividend rate of 13.25%) to
CIGNA and $15,000,000 of Class B Preferred Stock (principal amount
of $15 million; dividend rate of 13.25%) to the subordinated
lenders. Approximately $15,000,000 of these funds were used to
discharge the Standard Term Loan. The balance of these funds were
loaned by the Company to Standard Life. To evidence this
indebtedness, Standard Life issued a $140,000,000 surplus debenture
to the Company. In connection with the subordinated debt and
preferred stock financing, the Company issued detachable warrants
entitling the holders to purchase 1,107,480 shares of the Company's
Common Stock at $3.33 per share.

In May 1990, the Company effected an exchange agreement with the
holders of its Class A Preferred Stock and its Class B Preferred
Stock . Under the provisions of the exchange agreement, the holders
of the Class A Preferred Stock received $5 million principal amount
of a 13.25% 1998 Series Subordinated Notes, due November 1, 1998,
together with a make whole amount equal to 13.25% of the then
outstanding balance of the Note. The holders of the Class B
Preferred Stock received $15 million principal amount of a 13.25%
1999 Series Subordinated Notes, due November 1, 1999.

The Company prepaid the subordinated debt and purchased the
warrants in early 1993. See "Senior Loan".

Acquisition of Investors-Indiana. On February 14, 1995, ILCO,
through Investors-NA, purchased from Meridian Mutual Insurance
Company the stock of Meridian Life Insurance Company, an
Indianapolis-based life insurer, for a cash purchase price of $17.1
million. After the acquisition, Meridian Life changed its name to
Investors Life Insurance Company of Indiana ("Investors-Indiana").

Investors-Indiana was licensed in ten states and markets a variety
of individual life and annuity products through independent agents.

Acquisition of State Auto Life.  On July 9, 1997, ILCO and
Investors-Indiana acquired State Auto Life Insurance Company, an
Ohio domiciled life insurer, from State Automobile Mutual Insurance
Company, for an adjusted cash purchase price of $11.8 million.
In connection with this transaction, the bank group participating
in the Senior Loan agreed to defer payment of $4.5 million
otherwise payable on April 1, 1997 under the terms of the Senior
Loan, and to reduce the amount of the payment otherwise due on July
1, 1997 by $2.5 million. This deferral resulted in extending the
maturity date of the Senior Loan to October 1, 1998.  Under the
terms of the transaction, State Auto Life was merged into
Investors-Indiana.

Merger of Insurance Subsidiaries. Investors-NA redomesticated from
Pennsylvania to Washington in December of 1992. Investors-CA merged
into Investors-NA on December 31, 1992, and Standard Life merged
into Investors-NA on June 29, 1993. The mergers have achieved cost
savings, such as reduced auditing expenses involved in auditing one
combined company; the savings of expenses and time resulting from
the combined company being examined by one state insurance
department (Washington), rather than three (California,
Pennsylvania and Mississippi); the reduction in the number of tax
returns and other annual filings with 45 states; and smaller annual
fees to do business and reduced retaliatory premium taxes in most
states.

In December, 1997, ILIC transferred its domicile from New Jersey to
Indiana.  Following completion of the redomestication, ILIC merged
with Investors-Indiana, with ILIC as the surviving entity in the
merger process.  Immediately after the merger, ILIC changed its
name to Investors Life Insurance Company of Indiana.  As used
hereinafter, the phrase "Investors-IN" shall be used to refer to
the merged entities.  As a result of the merger, Investors-IN is
licensed in 44 states.  As of December 31, 1997, it had assets of
$153.8 million and capital and surplus of $23.1 million.

Management believes that these acquisitions and consolidations have
caused a reduction in expenses and have further strengthened the
financial condition of the combined companies.

Operations

The Company has developed management techniques to reduce operating
expenses by centralizing, standardizing and more efficiently
performing many functions common to most life insurance companies,
such as underwriting and policy administration, accounting and
financial reporting, marketing, regulatory compliance, actuarial
services and asset management. The Company has selectively
recruited personnel in sales, marketing and various administrative
departments.

The Company's centralized management techniques resulted in
significant employee reductions and expense savings in the life
insurance companies acquired by the Company. During 1997, the
general insurance expenses of the Company's insurance subsidiaries
on a statutory basis were $15,574,265, as compared to $12,008,163
in 1996 and  $13,737,883 in 1995.   The increase in 1997, as
compared to 1996, resulted primarily from expenses incurred in
connection with ILCO's acquisition of State Auto Life in July, 1997
and expenses related to the modification of data processing systems
for year 2000 compliance.   Management is committed to maintaining
the general insurance expenses of the Company's insurance
subsidiaries at a level which will generate an acceptable level of
profitability while maintaining the competitive pricing of their
insurance products.

In June 1991, FIC acquired Family Life Insurance Company. Following
the acquisition of Family Life by FIC, management integrated the
sales, marketing, underwriting, accounting, contract and licensing,
investments, personnel, data processing, home office support and
other departments of Family Life and the life insurance
subsidiaries of ILCO. Management believes this integration has
resulted in cost savings for ILCO's insurance subsidiaries and
Family Life. During 1992, the Company's insurance operations were
centralized at the Company's headquarters in Austin, Texas, with
the exception of certain services performed in Seattle, Washington.
Management believes that relocating administrative functions to
Austin has reduced costs and improved the efficiency of the
insurance companies' operations. The number of employees within the
Company and its subsidiaries (including employees who also perform
administrative services for Family Life) was approximately 326 at
December 31, 1997.


Principal Products

The Company's insurance subsidiaries are engaged primarily in
administering existing portfolios of life insurance policies and
annuity products. Approximately 84.7% of the total collected
premiums for 1997 were derived primarily from renewal premiums on
insurance policies and annuity products sold by the insurance
subsidiaries prior to their acquisition by the Company.

The Company's insurance subsidiaries are also engaged in marketing
and underwriting individual life insurance and annuity products in
49 states and the District of Columbia. These products are marketed
through independent, non-exclusive general agents.

The products currently being distributed include several versions
of universal life insurance and interest-sensitive whole life
insurance. Under a whole life insurance policy, the policyholder
pays a level premium over his or her expected lifetime. The policy
combines life insurance protection with a savings plan that
gradually increases in amount over a period of several years. The
universal and interest-sensitive whole life insurance policies of
the Company's insurance subsidiaries provide permanent life
insurance which credit company-declared current interest rates. The
universal life insurance portfolio of the Company's insurance
subsidiaries consists primarily of flexible premium universal life
insurance policies. Under the flexible premium policies,
policyholders may vary the amounts of their coverage (subject to
minimum and maximum limits) as well as the date of payment and
frequency of payments.

Direct statutory premiums received from all types of universal life
products were $40.6 million in 1997, as compared to $40.6 million
in 1996,  and $42.3 million in 1995.  Investors-NA received
reinsurance premiums from Family Life of $1.8 million in 1997,
pursuant to the reinsurance agreement for universal life products
written by Family Life.  In 1997, premium income from all life
insurance products was derived from all states in which the
Company's insurance subsidiaries are licensed, with significant
amounts derived from Pennsylvania (14%), Ohio (9.0%) New Jersey
(8.0%).

Two of the Company's insurance subsidiaries received premium income
from health insurance policies. In 1997, premium income from all
health insurance policies was $0.9 million in 1997 and 1996, as
compared to $1.1 million in 1995. Premium income from health
insurance in 1997 was derived from all of the states in which those
two insurance subsidiaries are licensed, with significant amounts
derived from New Jersey (15%), Pennsylvania (12%) and Florida
(10%).

In December, 1997, ILCO s life insurance subsidiaries entered into
a reinsurance treaty under which all of the contractual obligations
and risks under accident and health insurance policies were assumed
by a third party reinsurer. The transfer is effective as of July 1,
1997.   These risks and contractual obligations were sold pursuant
to, first, a coinsurance reinsurance agreement. Following
applicable regulatory approvals, the reinsurer will assume the
direct obligations of the companies, on an assumption reinsurance
basis.  The decision to dispose of this book of business was based
on management s analysis that the business was not generating
targeted profit objectives and that the products were not part of
the core business of the subsidiaries.  The sale permits the
companies to focus on its primary business - life insurance and
annuity sales. In connection with the transaction, the total amount
of net reserves transferred by the subsidiaries was $6,327,504. In
addition to the transfer of reserves, the life companies paid the
reinsurer $1,037,150 in connection with the transaction, which
amount was accounted for as an expense for the year ended December
31, 1997. In 1997, the transferred business generated approximately
$791,000 in annualized premiums.

Investors-NA sponsors a variable annuity separate account, which
offers single premium and flexible premium policies.  The policies
provide for the contract owner to allocate premium payments among
four different portfolios of Putnam Variable Trust (the "Putnam
Fund"), a series fund which is managed by Putnam Investment
Management, Inc.   Prior to April, 1995, the underlying investment
vehicle for the variable annuity contracts was the CIGNA Annuity
Funds Group.  A substitution of the Putnam Fund for the CIGNA Funds
was completed in April, 1995.  The plan of substitution was
approved by the Securities and Exchange Commission.  Following such
approval, the plan was submitted to policyholders for approval,
which  was obtained.  As of December 31, 1997, the assets held in
the separate account were $50.8 million. During 1997, the premium
income realized in connection with these variable annuity policies
was $172,666, which was received from existing contract owners.

Investors-NA also maintains a closed variable annuity separate
account, with approximately $22.3 million of assets as of December
31, 1997. The separate account was closed to new purchases in 1981,
as a result of an IRS ruling which adversely affected the status of
variable annuity separate account which invest in publicly-
available mutual funds.  The ruling did not adversely affect the
status of in-force contracts.

During 1997, ILCO's life companies expanded their marketing efforts
in the fixed annuity market. Direct deposits from the sale of fixed
annuity products were $3,499,000 in 1997, as compared to $1,741,000
in 1996, and $2,169,000 in 1995.  Investors-NA also received
reinsurance premiums from Family Life of $3,259,410 in 1997,
pursuant to a reinsurance agreement for annuity products between
Investors-NA and Family Life Insurance Company.


The following table sets forth, for the three years ended December
31, 1997, the combined premium income and other considerations
received by the Company's insurance subsidiaries from sales of
their various lines of insurance.


Item 6. Selected Financial Data (in thousands, except per share
data; certain restatements and adjustments are explained following
this table.)


                                   Year Ended December 31,
Type of Insurance Premium    1997          1996        1995
                                     (in thousands)
Individual:

Life                         $25,787     $15,031   $16,426
Accident & Health                792       1,035     1,218
  Total Individual Lines      26,579      16,066    17,644

Group:

Life                           2,639       2,018     2,594
Accident & Health                 40         0           6
  Total Group Lines            2,679       2,018     2,600



Credit:

Life                             (27)         (85)     (222)
Accident & Health                 14          (57)      240
  Total Credit Lines             (13)        (142)       18

Total Premium                 29,245       17,942    20,262
Reinsurance premiums ceded   (10,439)      (7,962)   (8,568)

     Total Net Premium        18,806        9,980    11,694

Amount Received on
Investment
Type Contracts                43,248       47,135    44,130
     Total Premiums and
     Deposits Received      $ 62,054      $57,115   $55,824



Investment of Assets

The assets held by the Company's insurance subsidiaries must comply
with applicable state insurance laws and regulations pertaining to
life insurance companies. The investment portfolio of the Company's
insurance subsidiaries is tailored to reflect the nature of the
insurance obligations, business needs, regulatory requirements and
tax considerations relating to the underlying insurance business
with respect to such assets. This is particularly the case with
respect to interest-sensitive life insurance and deferred annuity
products, where the investment emphasis is to obtain a targeted
margin of profit over the rate of interest credited to
policyholders, while endeavoring to minimize the portfolio's
exposure to changing interest rates. To reduce the exposure to such
rate changes, portfolio investments are selected so that diversity,
maturity and liquidity factors approximate the duration of
associated policyholder liabilities.

The investment objective of the Company's insurance subsidiaries
emphasizes the selection of short to medium term high quality fixed
income securities, rated Baa-3 (investment grade) or better by
Moody's Investors Service, Inc. At December 31, 1997, only 0.9% of
the Company's total assets were invested in mortgage loans or real
estate. Non-affiliated corporate debt securities that were
non-investment grade represented 0.7% of the Company's total assets
at December 31, 1997. The Company had investments in debt
securities of affiliated corporations aggregating approximately
$53.8 million as of December 31, 1997.

Investments in mortgage-backed securities included collateralized
mortgage obligations ("CMOs") of $244.8 million and mortgage-backed
pass-through securities of $42.9 million at December 31, 1997.
Mortgage-backed pass-through securities, sequential CMOs, support
bonds, and z-accrual bonds, which comprised approximately 47.6% of
the book value of the Company's mortgage-backed securities at
December 31, 1997, are sensitive to prepayment and extension risks.
The Company has reduced the risk of prepayment associated with
mortgage-backed securities by investing in planned amortization
class ("PAC"), target amortization class ("TAC") instruments,
accretion directed bonds and scheduled bonds. These investments are
designed to amortize in a predictable manner by shifting the risk
of prepayment of the underlying collateral to other investors in
other tranches ("support classes") of the CMO. PAC and TAC
instruments and accretion directed and scheduled bonds represented
approximately 50.0% and sequential and support classes represented
approximately 29.6% of the book value of the Company's mortgage--
backed securities at December 31, 1997. In addition, the Company
limits the risk of prepayment of CMOs by not paying a premium for
any CMOs. The Company does not invest in mortgage-backed securities
with increased prepayment risk, such as interest-only stripped
pass-through securities and inverse floater bonds. The Company does
invest in z-accrual bonds, but they constituted only 3.1% of the
book value of the Company's mortgage-backed securities at December
31, 1997. The prepayment risk that certain mortgage-backed
securities are subject to is prevalent in periods of declining
interest rates, when mortgages may be repaid more rapidly than
scheduled as individuals refinance higher rate mortgages to take
advantage of the lower current rates. As a result, holders of
mortgage-backed securities may receive large prepayments on their
investments which cannot be reinvested at an interest rate
comparable to the rate on the prepaying mortgages.  The Company did
not make additional investments in CMOs during 1997, and the
current investment objectives of the Company do not contemplate
additions to the portfolio of CMO investments during 1998.

The Company does not invest in non-agency mortgage-backed
securities, which have a greater credit risk than that of agency
mortgage-backed securities.

The Company does not make new mortgage loans on commercial
properties. Substantially all of the Company's mortgage loans were
made by its subsidiaries prior to their acquisition by the Company.
At December 31, 1997, 0.75% of the total book value of mortgage
loans held by the Company had defaulted as to principal or interest
for more than 90 days, and none of the Company's mortgage loans
were in foreclosure. During 1997, none of the Company's mortgage
loans were converted to foreclosed real estate or were restructured
while the Company owned them.

Another key element of the Company's investment strategy is to
avoid large exposure in other investment categories which the
Company believes carry higher credit or liquidity risks, including
private placements, partnerships and bank participation. These
categories accounted for approximately 0.49% of the Company's
invested assets at December 31, 1997.

Investors-NA was the owner and developer of Bridgepoint Square
Offices.  Following the completion of the construction, the project
consisted of four office buildings, with a total rentable space of
approximately 364,000 square feet, and two parking garages.
Investors-NA purchased the 20 acre tract of land for this complex
in January, 1995. At that time, the tract included one completed
and fully leased office building, an adjacent parking garage, and
sites for three more office buildings and another parking garage.
Investors-NA completed construction of the three remaining office
buildings and parking garage in 1997.

In May 1996, Family Life Insurance Company ("FLIC"), an indirect,
100% owned subsidiary of FIC, purchased a 7.1 acre tract adjacent
to the original Bridgepoint Square tract. This second tract
contained one building site and one garage site. In January, 1997,
FLIC began construction on a four-story office building, with
rentable space of approximately 76,793 square feet, and the parking
garage, with 350 parking spaces. In May, 1997, the entire rentable
space was leased to a major tenant in the technology business.
Construction of the parking garage and the building shell was
completed in October, 1997.

In November, 1997, Investors-NA and Family Life entered into a sale
agreement with an independent third party for the sale of their
respective interests in Bridgepoint Square Offices. The
transaction, which closed on December 5, 1997, was  for an
aggregate price of $78 million. The sale resulted in a net pre-tax
profit to Investors-NA of approximately $14.0 million, and a net
pre-tax profit to Family Life of approximately $4.5 million. See
Item 2. Properties.

The Company has established and staffed an investment department,
which manages portfolio investments and investment accounting
functions for ILCO's life insurance subsidiaries.


Agency Operations

ILCO's insurance subsidiaries collectively market through the
"Investors" distribution system. Independent non-exclusive agents,
general agents and brokers are recruited nation-wide to sell the
products. Such agents and brokers also sell insurance products for
companies in competition with ILCO's insurance subsidiaries. In
order to attract agents and enhance the sale of its products, the
Company's insurance subsidiaries pay competitive commission rates
and provides other sales inducements. The Investors sales
distribution system is presently concentrating its efforts on the
promotion and sale of universal life, interest-sensitive life, term
life and fixed annuity products.

Marketing and sales for all of the Company's insurance subsidiaries
are directed by the Executive Vice President of Marketing and
Sales.  The Vice President for Investors Sales directs Regional
Vice Presidents who are responsible for the recruitment and
maintenance of the general agents and managing general agents for
individual insurance sales.


Data Processing

Pursuant to a data processing agreement with a major service
company, the data processing needs of ILCO's and FIC's insurance
subsidiaries were provided at a central location until November 30,
1994. Since December, 1994, all of those data processing needs have
been provided to ILCO's and FIC's Austin, Texas and Seattle,
Washington facilities by FIC Computer Services, Inc., a  subsidiary
of FIC. See Item 13 - Certain Relationships and Related
Transactions with Management.

As the provider of data processing for the Company and its
subsidiaries and affiliates, FIC Computer Services, Inc. utilizes
a centralized computer system to process policyholder records and
financial information. In addition, the Company uses non-
centralized computer terminals in connection with its operations.
The software programs used by these systems will be affected by
what is referred to as the "Year 2000 problem" or "Y2K problem".
This refers to the limitations of the programming code in certain
existing software programs to recognize date sensitive information
as the year 2000 approaches. Unless modified prior to the year
2000, such systems may not properly recognize such information and
could generate erroneous data or cause a system to fail to operate
properly.

In response to the potential operations and policy administration
problems caused by the computer calendar change on January 1, 2000,
the management of the Company instructed FIC Computer Services,
Inc. to analyze its system capabilities and the operational
requirements of the Company and its respective subsidiaries and
affiliates with respect to the Y2K problem. In 1996, FIC Computer
Services, Inc. conducted the analysis of all of the Company's
systems. After reviewing that analysis, the Company determined that
a plan should be devised to prevent the data processing errors that
may be encountered due to the Y2K problem. In November, 1996, a
three-year plan outlining a proposed solution (the "Plan") was
established and approved by the Company to ensure that all of the
data processing systems would be Y2K compliant or converted onto
Y2K compliant systems. The Company began the major work under this
Plan in 1997 and it is scheduled to be completed by the Fall of
1999.

The Company established this Plan because FIC Computer Services,
Inc.'s analysis revealed that those systems that are not converted
or modified into Y2K compliant systems, may produce  policy
administration errors as a result of the calendar change, requiring
that the life insurance subsidiaries manually administer those
policies. This would result in a material increase in
administrative costs incurred by the life insurance subsidiaries of
both ILCO and FIC.

The Company's analysis also indicated that, in addition to
potential policy administration errors in the life insurance
subsidiaries, any machine which contains a microchip is subject to
error due to the Y2K problem. Such an occurrence could not only
create errors in the Company's internal systems, but those of the
Company's suppliers and service providers. In order to prepare for
this contingency, the Plan called for the acquisition of new
mainframe hardware and software, and the modification and
conversion of the Company's telephones, voice mail and desk-top
personal computers.

Additionally, the Company is developing a strategy for obtaining
assurances from its various suppliers and service providers. In
furtherance of this strategy, the Company is creating
questionnaires which it will forward to its suppliers and service
providers regarding the Y2K problem. The questionnaire will request
information regarding that particular supplier's or service
provider's awareness of the Y2K problem, its impact on their
operations, and their plan for addressing any problems as they
relate to that supplier's or service provider's performance of
their contractual obligations to the Company and its subsidiaries.

The Plan calls for a conversion of certain systems onto the
Company's CK/4 System; a system which is designed to be Y2K
compliant according to the representations of the vendor. Those
systems which are not converted will be upgraded by changing
individual lines of computer code in order to modify current
operating software such that it will become Y2K compliant.

Under the Plan, FIC Computer Services, Inc. will utilize its own
personnel, acquire Y2K compliant operating software, and engage the
assistance of outside consultants to facilitate the systems
conversions and modifications. The Company has budgeted
approximately $470,000 for implementation of the Plan. In the event
that the Plan does not achieve full compliance by the target dates,
or if unforeseen matters involving Y2K appear before or after
January 1, 2000, the Company will utilize the staff of FIC Computer
Services, Inc. to identify and resolve such issues as and if they
arise.

In order to continuously evaluate the effectiveness of the
modifications and conversions made to the various systems, FIC
Computer Services, Inc. has acquired testing software to simulate
dates on or after January 1, 2000. Additionally, FIC Computer
Services, Inc. runs the systems through model office cycles and
also conducts visual inspections of screen displays to determine
whether the systems are functioning in a Y2K compliant manner.

As of February 1, 1998, FIC Computer Services, Inc. estimated that
it had completed the necessary conversions and modifications on the
administrative systems which process approximately 35% of the
insurance policies for the Company and its subsidiaries. This
included the conversion of the ALIS System (administering
approximately 49,280 policies) to CK/4 in January of 1998. The TI
System (administering approximately 5,244 policies) will be
converted to CK/4 in May, 1998, bringing the total to approximately
38%. The conversion of the Life 70 system (administering
approximately 17,285 policies for Investors-IN) is scheduled for
completion in April, 1999. The modification of the Lifecomm-B
system which is responsible for the 19,205 policies assumed after
the acquisition of State Auto Life is also scheduled for completion
in April, 1999. The conversion of the Lifecomm-A system
(administering approximately 65,266 policies for Investors-NA) is
scheduled for completion in September of 1999. The modification of
three non-material systems which administer 6,806 credit life
policies, 2,514 group policies and 15,938 industrial life policies
are scheduled for completion in December of 1998, March of 1999 and
June of 1999, respectively.

The various software applications described above are licensed to
the Company under agreements which permit the Company's
subsidiaries to process business on its computer systems utilizing
such software.

In 1997, FIC Computer Services, Inc. purchased new mainframe
hardware and accompanying operating software, which the vendor has
represented to be Y2K compliant.  FIC Computer Services, Inc. will
be testing this hardware and software in 1998. The telephone system
has been tested by the maintenance provider for that system and the
Company has received assurances that the telephone system is Y2K
compliant.

With respect to non-centralized systems(i.e., desktop computers),
the Company anticipates that updated software releases will be
commercially available well in advance of the year 2000.
Accordingly, to the extent that such systems rely on date sensitive
information, the Company expects that the effort needed to correct
for Y2K problems will be less time intensive than the effort needed
to achieve compliance for its centralized systems.

Competition

There are many life and health insurance companies in the United
States. A significant number of casualty companies also market
health insurance. Agents placing insurance business with ILCO's
life insurance subsidiaries are compensated on a commission basis.
However, some companies pay higher commissions and charge lower
premium rates and many companies have more substantial resources.

The principal cost and competitive factors that affect the
Company's ability to sell its life and health insurance and annuity
products on a profitable basis are: (1) the general level of
premium rates for comparable products; (2) the extent of individual
policy holder services required to service each product category;
(3) general interest rate levels; (4) competitive commission rates
and related marketing costs; (5) legislative and regulatory
requirements and restrictions; (6) the impact of competing
insurance and other financial products; and (7) the condition of
the regional and national economies.

Reinsurance and Reserves

Reinsurance Ceded:

In accordance with general practices in the insurance industry, the
Company's insurance subsidiaries limit the maximum net losses that
may arise from large risks by reinsuring with other carriers. Such
reinsurance provides for a portion of the mortality risk to be
retained (the "Retention") with the excess being ceded to a
reinsurer at a premium set forth in a schedule based upon the age
and risk classification of the insured. The reinsurance treaties
provide for allowances that help the Company's insurance
subsidiaries offset the expense of writing new business. Investors-
IN generally retains the first $60,000 to $100,000 of risk on the
life of any individual, depending upon the type of coverage being
written. Investors-NA generally retains the first $100,000 to
$250,000 of risk on the life of any individual, depending on the
type of coverage being issued.

In 1988, Investors-NA entered into a bulk reinsurance treaty under
which it reinsured all of its risks under accidental death benefit
policies. Investors-IN had previously obtained similar bulk
reinsurance for accidental death benefit policies. The treaty was
renegotiated with a different reinsurer in January, 1997.

As discussed above (see "Principal Products"), in December, 1997,
ILCO s life insurance subsidiaries entered into a reinsurance
treaty under which all of the contractual obligations and risks
under individual accident and health insurance policies were
assumed by a third party reinsurer.  In connection with the
transaction, the total amount of net reserves transferred by the
subsidiaries was $6,327,504.  In addition to the transfer of
reserves, the life companies paid the reinsurer $1,037,150 in
connection with the transaction, which amount was accounted for as
an expense for the year ended December 31, 1997. In 1997, the
accident and health business generated approximately $791,000 in
annualized premiums.

Although reinsurance does not eliminate the exposure of the
Company's insurance subsidiaries to losses from risks insured, the
net liability of such subsidiaries will be limited to the portion
of the risk retained, provided that the reinsurers meet their
contractual obligations.

The Company's insurance subsidiaries carry reserves on their books
to meet future obligations under their outstanding insurance
policies. Such reserves are believed to be sufficient to meet
policy obligations as they mature and are calculated using
assumptions for interest, mortality, expenses and withdrawals in
effect at the time the policies were issued.

Reinsurance Assumed:

In 1995, Investors-NA entered into a reinsurance agreement with
Family Life pertaining to universal life insurance written by
Family Life.  The reinsurance agreement is on a co-insurance basis
and applies to all covered business with effective dates on and
after January 1, 1995.  The agreement applies to only that portion
of the face amount of the policy which is less than $200,000; face
amounts of $200,000 or more are reinsured by Family Life with a
third party reinsurer.  In 1996, Investors-NA entered into a
reinsurance agreement with Family Life, pertaining to annuity
contracts written by Family Life. The agreement applies to
contracts written on or after January 1, 1996. These reinsurance
arrangements reflect management's plan to develop universal life
and annuity business at Investors-NA, with Family Life
concentrating on the writing of term life insurance products.

FIC's Acquisition of Control of the Company

In January 1985, FIC acquired 26.53% of ILCO's common stock. FIC
and Family Life subsequently acquired additional shares of ILCO's
common stock and as of March 16, 1998, FIC owned, directly and
indirectly through Family Life, approximately 45.4% of the
outstanding shares of ILCO's common stock. FIC holds options to
acquire up to 1,702,155 additional shares of ILCO Common Stock.
Giving effect to the exercise of those options, FIC would own,
directly and indirectly through Family Life, approximately 61% of
the outstanding shares of ILCO Common Stock. The exercise price of
the options is equal to the average quoted market price of ILCO's
common stock over the six month period immediately prior to
exercise. In addition, in the event that any other party were to
seek to acquire, without the prior approval of ILCO's Board of
Directors, securities aggregating five percent or more of ILCO's
outstanding common stock, FIC would have the right to acquire,
under the same price formula, that number of shares of ILCO's
common stock which, when added to the number of shares then owned
by FIC, would amount to 51% of ILCO's outstanding common stock.

The stock options were granted in 1986 to FIC by the Company
principally in consideration for a $1,200,000 unsecured loan from
FIC, FIC's agreement to guarantee up to $4,000,000 of Registrant's
financial obligations and FIC's agreement to guarantee, upon
demand, ILCO's performance under its lease on its headquarters
building. In addition, FIC guaranteed a $15,000,000 term loan of
ILCO. Under the terms of the option agreement, the options remain
in effect so long as FIC guarantees any indebtedness of ILCO.  As
described under the heading "Senior Loan", the current Senior Loan
of ILCO is scheduled to be fully repaid on October 1, 1998.
Accordingly, unless ILCO s Senior Loan is extended, or ILCO
otherwise incurs indebtedness which is guaranteed by FIC, FIC s
rights under the 1986 option agreement would expire on October 1,
1998.


FIC's Acquisition of Family Life

After FIC acquired control of ILCO, FIC's primary involvement in
the insurance industry was its indirect investment, through ILCO,
in ILCO's insurance subsidiaries. In June 1991, FIC acquired Family
Life Insurance Company, ("Family Life"), based in Seattle,
Washington, from Merrill Lynch Insurance Group, Inc.

Family Life underwrites and sells mortgage protection life
insurance to customers who are mortgage borrowers from financial
institutions where Family Life has marketing relationships. Family
Life distributes its insurance products primarily through a
national career sales force in 49 states and the District of
Columbia.

The $114 million purchase price for Family Life and an additional
$5 million for transaction costs, working capital and other related
purposes were financed by: (a) a $50 million senior loan provided
by a group of banks, (b) $44 million subordinated notes issued to
the seller and its affiliates and (c) $25 million senior
subordinated notes issued to Investors-CA and Investors-NA. In
addition, FIC granted to Investors-CA and Investors-NA non-
transferable options to purchase up to a total of 9.9% of FIC's
common stock at a price of $10.50 per share, equivalent to the then
current market price, subject to adjustment to prevent dilution. As
a result of the five-for-one stock split implemented by FIC,
effective in November, 1996, the exercise price of the options was
changed to $2.10 per share. The initial terms of the option
provided for their expiration on June 12, 1998, if not previously
exercised. In connection with the 1996 amendments to the
subordinated loans held by Investors-NA, the expiration date of the
options was extended to September 12, 2006.  For a discussion of
the 1996 amendments, see Item 13, Certain Relationships and Related
Transactions with Management, above.  In July 1993, the
subordinated notes held by the seller and its affiliates were
prepaid. The primary source of the funds used to prepay the
subordinated debt was a new subordinated loan of $34.5 million
obtained from Investors-NA. See Item 13, above.

Senior Loan

 The current Senior Loan of ILCO was originally arranged in
connection with the 1988 acquisition of Investors-NA and Investors-
CA.  In January, 1993, the Company refinanced its Senior Loan.
That transaction was done in connection with the prepayment of the
subordinated indebtedness and the purchase of warrants which had
been issued as part of the financing of the 1988 acquisitions.  The
terms of the amended and restated credit facility  are
substantially the same as the terms and provisions of the 1988
senior loan. The average interest rate paid by the Company on its
Senior Loan was approximately  8.63% during 1995, 7.76% during 1996
and 7.68% during 1997.  The maturity date, which had been December
31, 1996, was extended to July 1, 1998 for the Senior Loan.

In February, 1995, the Company borrowed an additional $15 million
under the Senior Loan to help finance the acquisition of
Investors-IN, and the maturity date of the Senior Loan was further
extended to July 1, 1999.  As of December 31, 1995, the outstanding
principal balance of ILCO's senior loan obligations was $59.4
million.  In January, 1996, the Company made a scheduled payment of
$4.5 million under its Senior Loan.  In March, 1996, the Company
made the scheduled payments for April 1st and July 1st, totaling $9
million.  At that same time, the Company made a payment of
$941,000, an additional payment under the terms of the loan applied
to the principal balance.  On April 1, 1996, an optional principal
payment in the amount of $15 million was made, which resulted in
advancing the scheduled payoff date of the Senior Loan to April 1,
1998.  In July, 1996, the Company made the principal payment for
October 1st ($4.5 million), plus an optional principal payment of
$0.5 million. In connection with the acquisition of State Auto Life
Insurance Company in July, 1997, the Senior Loan agreement was
modified to extend the maturity date to October 1, 1998.

The Senior Loan bears interest, at the option of the Company, at a
rate per annum equal to (i) the Alternate Base Rate (as defined
below) plus the Applicable Margin (as defined below), or (ii) LIBOR
(adjusted for reserves) for interest periods of 1, 2, 3 or 6 months
plus the Applicable Margin. LIBOR is London Inter-Bank Offered
Rates. The Alternate Base Rate for any day is the higher of (a) the
agent bank's corporate base rate as announced from time to time and
(b) the federal funds rate as published by the Federal Reserve Bank
of New York plus 0.5%. The Applicable Margin, depending on the
outstanding principal balance of the Senior Loan, ranges from 0.5%
to 1.25% for loans that bear interest based upon the Alternate Base
Rate and from 1.75% to 2.5% for loans that bear interest based upon
LIBOR. The initial Applicable Margin for Alternate Base Rate loans
is 1.25% and the initial Applicable Margin for LIBOR loans is 2.5%.

The obligations of the Company under the Senior Loan are secured
by: (1) all of the outstanding shares of stock of Investors-NA, (2)
a $15,000,000 surplus debenture of Investors-NA payable to the
Company, which had an outstanding principal balance of $5,206,224
as of December 31, 1997 and (3) a $140,000,000 surplus debenture of
Investors-NA payable to the Company, which had an outstanding
principal balance of $22,590,000 as of December 31, 1997. The
obligations of the Company under the Senior Loan are guaranteed by
FIC.

The Senior Loan prohibits the payment by the Company of cash
dividends on the Common Stock and contains covenants, including
restrictive covenants that impose limitations on the Company's and
its subsidiaries' ability to, among other things: (i) make
investments; (ii) create or incur additional debt; (iii) engage in
businesses other than their present and related businesses; (iv)
create or incur additional liens; (v) incur contingent obligations;
(vi) dispose of assets, (vii) enter into transactions with
affiliated companies; and (viii) make capital expenditures; and
various financial covenants, including covenants requiring the
maintenance of a minimum cash flow coverage ratio, minimum
consolidated net worth and minimum statutory surplus of
subsidiaries, and a minimum ratio (360%) of (i) the sum of the
statutory capital and surplus, the asset valuation reserve and
one-half of the dividend liability pertaining to participating
policies of each insurance company subsidiary to (ii) its
respective Authorized Control Level RBC (see "Regulation").

The Senior Loan specifies events of default, including, but not
limited to, failure to pay amounts under the Senior Loan documents
when due; defaults or violation of covenants under other
indebtedness; defaults under the loans made by Investors-NA to
subsidiaries of FIC; the loss of any license of an insurance
subsidiary of the Company which would have a material adverse
effect on the Company; defaults under the FIC guaranty agreement;
changes in ownership or control of FIC or the Company by its
controlling person, Roy F. Mitte, or in the Company by FIC; and the
occurrence of certain events of bankruptcy. If Mr. Mitte ceases to
control the management of the Company solely by reason of (i) his
death or (ii) his permanent inability to perform his usual and
customary duties on a full-time basis on behalf of the Company and
FIC as the result of physical or mental infirmity, a default will
occur, and the banks holding in the aggregate at least 66 2/3% of
the outstanding balance of the Senior Loan may, on or after 180
days after the date on which such default occurs, declare the
Senior Loan immediately due and payable. Mr. Mitte's ability to
communicate and his mobility are impaired as a result of a stroke
he suffered in May 1991. However, Mr. Mitte continues to control
the management of the Company, and Mr. Mitte's impairments did not
constitute a default under the Senior Loan.  See Item
10(b)-Executive Officers of the Registrant.

The outstanding principal balance of the Senior Loan was
$10,964,000 as of December 31, 1997.

Regulation

General. The Company's insurance subsidiaries are subject to
regulation and supervision by the states in which they are licensed
to do business. Such regulation is designed primarily to protect
policy owners. Although the extent of regulation varies by state,
the respective state insurance departments have broad
administrative powers relating to the granting and revocation of
licenses to transact business, licensing of agents, the regulation
of trade practices and premium rates, the approval of form and
content of financial statements and the type and character of
investments.

These laws and regulations require the Company's insurance
subsidiaries to maintain certain minimum surplus levels and to file
detailed periodic reports with the supervisory agencies in each of
the states in which they do business and their business and
accounts are subject to examination by such agencies at any time.
The insurance laws and regulations of the domiciliary states of the
Company's insurance subsidiaries require that such subsidiaries be
examined at specified intervals.

Investors-NA and Investors-IN are domiciled in the states of
Washington and Indiana, respectively. In December 1992,
Investors-NA redomesticated from Pennsylvania to Washington, and
Investors-CA merged into Investors-NA. In June, 1993, Standard Life
merged into Investors-NA. Prior to December, 1997, Investors-IN was
domiciled in the State of New Jersey. In December, 1997,
Investors-IN transferred its domicile to the State of Indiana.

A number of states regulate the manner and extent to which
insurance companies may test for acquired immune deficiency
syndrome (AIDS) antibodies in connection with the underwriting of
life insurance policies. To the extent permitted by law, the
Company's insurance subsidiaries consider AIDS information in
underwriting coverage and establishing premium rates. An evaluation
of the financial impact of future AIDS claims is extremely
difficult, due in part to insufficient and conflicting data
regarding the incidence of the disease in the general population
and the prognosis for the probable future course of the disease.

Risk-Based Capital Requirements. Effective for the 1993 calendar
year, the National Association of Insurance Commissioners ("NAIC")
has adopted Risk-Based Capital ("RBC") requirements to evaluate the
adequacy of statutory capital and surplus in relation to investment
and insurance risks associated with; (i) asset quality; (ii)
mortality and morbidity; (iii) asset and liability matching; and
(iv) other business factors. The states will use the RBC formula as
an early warning tool to discover potential weakly capitalized
companies for the purpose of initiating regulatory action. The RBC
requirements are not intended to be a basis for ranking the
relative financial strength of insurance companies. In addition,
the formula defines a new minimum capital standard which will
supplement the prevailing system of low fixed minimum capital and
surplus requirements on a state-by-state basis.

The RBC requirements provide for four different levels of
regulatory attention in those states that adopt the NAIC
regulations, depending on the ratio of the company's Total Adjusted
Capital (which generally consist of its statutory capital, surplus
and asset valuation reserve) to its Authorized Control Level RBC.
A  "Company Action Level Event" is triggered if a company's Total
Adjusted Capital is less than 200% but greater than or equal to
150% of its Authorized Control Level RBC, or if a negative trend
has occurred (as defined by the regulations) and Total Adjusted
Capital is less than 250% but more than 200% of its Authorized
Control Level RBC. When a Company Action Level Event occurs, the
company must submit a comprehensive plan to the regulatory
authority which discusses proposed corrective actions to improve
its capital position. A "Regulatory Action Level Event" is
triggered if a company's Total Adjusted Capital is less than 150%
but greater than or equal to 100% of its Authorized Control Level
RBC. When a Regulatory Action Level Event occurs, the regulatory
authority will perform a special examination of the company and
issue an order specifying corrective actions that must be followed.
An "Authorized Control Level Event" is triggered if a company's
Total Adjusted Capital is less than 100% but greater than or equal
to 70% of its Authorized Control Level RBC, and the regulatory
authority may take any action it deems necessary, including placing
the company under regulatory control. A "Mandatory Control Level
Event" is triggered if a company's total adjusted capital is less
than 70% of its Authorized Control Level RBC, and the regulatory
authority is mandated to place the company under its control.

Calculations using the NAIC formula and the statutory financial
statements of the Company's insurance subsidiaries as of December
31, 1997 indicate that the Total Adjusted Capital of each of the
Company's insurance subsidiaries is above 737% of its respective
Authorized Control Level RBC.

Solvency Laws Assessments. The solvency or guaranty laws of most
states in which the Company's insurance subsidiaries do business
may require the Company's insurance subsidiaries to pay assessments
(up to certain prescribed limits) to fund policyholder losses or
liabilities of insurance companies that become insolvent. Recent
insolvencies of insurance companies increase the possibility that
such assessments may be required. These assessments may be deferred
or forgiven under most guaranty laws if they would threaten an
insurer's financial strength and, in certain instances, may be
offset against future premium taxes.  The insurance companies
record the expense for guaranty fund assessments in the period
assessed.    The net amount of such assessment for the Company's
insurance subsidiaries was approximately $70,253 in the year ended
December 31, 1997.  That amount is net of the amounts that can be
offset against future premium taxes.  The likelihood and amount of
any other future assessments cannot be estimated and are beyond the
control of the Company.

Surplus Debentures and Dividends. The principal sources of cash for
the Company to make payments of principal and interest on the
Senior Loan are payments under the surplus debentures of
Investors-NA (a Washington-domiciled corporation).

The surplus debentures were originally issued by Standard Life.
Upon the merger of Standard Life into Investors-NA, the obligations
of the surplus debentures were assumed by Investors-NA. Since
Investors-NA is domiciled in the State of Washington, the
provisions of Washington insurance law apply to the surplus
debentures. Under the provisions of the surplus debentures and
current law, Investors-NA can pay interest and principal on the
surplus debentures without having to obtain the prior approval of
the Washington Insurance Commissioner; provided that, after giving
effect to such payments, the statutory surplus of Investors-NA is
in excess of $10 million. As of December 31, 1997, the statutory
surplus of Investors-NA was $71.5 million.   Investors-NA does give
five-days prior notification to the Washington Insurance Department
of each proposed payment on the surplus debentures in accordance
with an agreement between Investors-NA and the Department.  ILCO
does not anticipate that Investors-NA will have any difficulty in
making principal and interest payments on the surplus debentures in
the amounts necessary to enable ILCO to service the Senior Loan for
the foreseeable future.

Pursuant to the surplus debentures Investors-NA paid to the Company
principal and interest on the surplus debentures of $22,749,576 in
1995, $36,288,469 in 1996 and $14,093,711 in 1997.

In addition to the payments under the terms of the Surplus
Debentures, ILCO has received dividends from Standard Life (now,
from Investors-NA).  Washington's insurance code includes the
"greater of" standard for payment of dividends to shareholders, but
has requirements that prior notification of a proposed dividend be
given to the Washington Insurance Commissioner and that cash
dividends may be paid only from earned surplus.  Under the "greater
of" standard, an insurer may pay a dividend in an amount equal to
the greater of (i) 10% of policyholder surplus or (ii) the
insurer's net gain from operations for the previous year.  As of
December 31, 1997, Investors-NA had earned surplus of $32.9
million. Since the law applies only to dividend payments, the
ability of Investors-NA to make principal and interest payments
under the Surplus Debentures is not affected.  ILCO does not
anticipate that Investors-NA will have any difficulty in making
principal and interest payments on the Surplus Debentures in the
amounts necessary to enable ILCO to service the Senior Loan for the
foreseeable future.

Investors-IN is domiciled in the State of Indiana. Under the
Indiana insurance code, a domestic insurer may make dividend
distributions upon proper notice to the Department of Insurance, as
long as the distribution is reasonable in relation to adequate
levels of policyholder surplus and quality of earnings. Under
Indiana law the dividend must be paid from earned surplus.
Extraordinary dividend approval would be required where a dividend
exceeds the greater of 10% of surplus or the net gain from
operations for the prior fiscal year. Investors-IN had earned
surplus of $18.1 million at December 31, 1997.

Valuation Reserves. Commencing in 1992, the Mandatory Securities
Valuation Reserve ("MSVR") required by the NAIC for life insurance
companies was replaced by a mandatory Asset Valuation Reserve
("AVR") which is expanded to cover mortgage loans, real estate and
other investments. During 1997, a change in the NAIC's AVR
procedures resulted in a one-time reduction in the amount of the
reserves held by ILCO's life insurance subsidiaries, with a
corresponding one-time increase in the amount of surplus.  For
Investors-NA, the amount of the increase in surplus was
$2,395,000; for Investors-IN, the amount of the increase in surplus
was $590,000.  A new mandatory Interest Maintenance Reserve
("IMR"), designed to defer realized capital gains and losses due to
interest rate changes on fixed income investments and to amortize
those gains and losses into future income, is also effective for
1992. Previously, realized capital gains attributable to interest
rate changes were credited to the MSVR and had the effect of
reducing the required MSVR contributions of ILCO's insurance
subsidiaries. Effective in 1992, such realized capital gains are
credited to the IMR. As a result of these changes, management
believes that the Company's insurance subsidiaries are required to
accrue greater aggregate asset valuation reserves. The combination
of the AVR and IMR will affect statutory capital and surplus and
may reduce the ability of the Company's insurance subsidiaries to
pay dividends and make payments on the surplus debentures.

Insurance Holding Company Regulation. Investors-NA and Investors-IN
are subject to regulation under the insurance and insurance holding
company statutes of Washington and Indiana. The insurance holding
company laws and regulations vary from jurisdiction to
jurisdiction, but generally require insurance and reinsurance
subsidiaries of insurance holding companies to register with the
applicable state regulatory authorities and to file with those
authorities certain reports describing, among other information,
their capital structure, ownership, financial condition, certain
intercompany transactions and general business operations. The
insurance holding company statutes also require prior regulatory
agency approval or, in certain circumstances, prior notice of
certain material intercompany transfers of assets as well as
certain transactions between insurance companies, their parent
companies and affiliates.

Under the Washington and Indiana insurance holding company laws,
unless (i) certain filings are made with the respective department
of insurance, (ii) certain requirements are met, including a public
hearing and (iii) approval or exemption is granted by the
respective insurance commissioner, no person may acquire any voting
security or security convertible into a voting security of an
insurance holding company, such as the Company, which controls an
insurance company domiciled in that state, or merge with such a
holding company, if as a result of such transaction such person
would "control" the insurance holding company. "Control" is
presumed to exist if a person directly or indirectly owns or
controls 10% or more or the voting securities of another person.

Potential Federal Regulation. Although the federal government
generally does not directly regulate the insurance industry,
federal initiatives often have an impact on the business. Congress
and certain federal agencies are investigating the current
condition of the insurance industry (encompassing both life and
health and property and casualty insurance) in the United States in
order to decide whether some form of federal role in the regulation
of insurance companies would be appropriate. Congress is currently
conducting a variety of hearings relating in general to the
solvency of insurers. It is not possible to predict the outcome of
any such congressional activity nor the potential effects thereof
on the Company's insurance subsidiaries.

Congressional initiatives directed at repeal of the McCarran-
Ferguson Act (which exempts the "business of insurance" from most
federal laws, including the antitrust laws, to the extent it is
subject to state regulation) and judicial decisions narrowing the
definition of "business of insurance" for McCarran-Ferguson Act
purposes may limit the ability of insurance companies in general to
share information with respect to rate-setting, underwriting and
claims management practices. Current and proposed federal measures
which may also significantly affect the insurance industry include
minimum solvency requirements and removal of barriers preventing
banks from engaging in the insurance business.

Federal Income Taxation

The Revenue Reconciliation Act of 1990 amended the Internal Revenue
Code of 1986 to require a portion of the expenses incurred in
selling insurance products to be deducted over a period of years,
as opposed to an immediate deduction in the year incurred. Since
this change only affects the timing of the deductions, it does not
affect tax expense as shown on the Company's financial statements
prepared in accordance with GAAP. However, the change will increase
the tax for statutory accounting purposes in the first few years,
which will reduce statutory surplus and, accordingly, may decrease
the amount of cash dividends that Investors Life-NA can pay to the
Company. For the years ended December 31, 1995, 1996 and 1997, the
decreases in the current income tax provisions of the Company's
insurance subsidiaries due to this change were $118,480, $90,413
and $269,633, respectively. The change has a negative tax effect
for statutory accounting purposes when the premium income of the
Company's insurance subsidiaries increases, but has a positive tax
effect when their premium income decreases.

                            Segment Information

The principal operations of the Company's insurance subsidiaries
are the underwriting of life insurance and annuities. Accordingly,
no separate segment information is required to be provided by the
Registrant for the three-year period ending December 31, 1997.


Item 2. Properties

The Registrant's headquarters are currently located at Austin
Centre, 701 Brazos, Suite 1400, Austin, Texas. Investors-NA
purchased Austin Centre, an office-hotel property in downtown
Austin in August 1991 for a purchase price of $31,275,000 from an
unrelated seller that had previously acquired the property through
foreclosure. Austin Centre covers a full city block and is a
sixteen story mixed use development consisting of 343,664 square
feet of office/retail space (predominately office space), a 314
room hotel and 61 luxury apartments, all united by a 200 foot high
glass atrium. The project was completed in October 1986.

In September 1995, Investors-NA entered into a contract to sell
Austin Centre to an Austin-based real estate investment firm for a
purchase price of $62.675 million, less $1 million to be paid to a
capital reserve account for the purchaser.  The sale  was
consummated  on March 29, 1996.  A portion of the sale proceeds
equal to the amount that Investors-NA presently had invested in
Austin Centre were retained and reinvested by Investors-NA.  The
balance of the net proceeds of the sale were used to reduce ILCO's
bank indebtedness by approximately $15 million.

Following the sale of the Austin Centre, the Company and its
affiliates continued to occupy three floors of the office space,
under a lease arrangement. The current lease, which was entered
into in May, 1997, is for a five (5) year term ending in October,
2002, with options to renew for three successive five (5) year
terms thereafter.

In January, 1995, ILCO, through Investors-NA, purchased, as an
investment property, an office building project known as
Bridgepoint Office Square in Austin, Texas for a cash purchase
price of $9.75 million. The property consists of 20 acres of land
with four office building sites and two parking structure sites.
The first phase of development of the property was completed in
1986 and consists of a five-story office building with 83,474
square feet of rentable space and a 550-car parking garage. The
office space is fully rented.

In the fourth quarter of 1995, construction began on the second
office building, containing approximately 109,000 rentable square
feet, and the other parking garage containing approximately 871
spaces.  That phase of the project was completed in September 1996,
and is 100% leased to a major tenant in the technology business.

In March 1996, construction commenced on the third office building,
with approximately 79,000 rentable square feet of office space and
was completed in December, 1996. Investors-NA leased approximately
43,000 square feet of the third office building to the same tenant
which leased all of the space in the second building.  The
remaining space was leased in October, 1996 to a major tenant also
in the technology business.

Construction began on the fourth building in July 1996,  and was
completed in July, 1997. The fourth building contains approximately
92,459 rentable square feet. In September of 1996, approximately
23,619 rentable square feet were leased to an oil and gas company,
which then expanded its premises to 29,631 under an expansion
option contained in its Lease.  Another 8,368 square feet was
leased in March, 1997, to a company involved in the technology
field.  In June, 1997, approximately 40,611 rentable square feet
was leased to a tenant in the technology field. In November, 1997
approximately 2967 rentable square feet was leased to a securities
brokerage firm. The remaining 10,882 rentable square feet is
reserved for a health club facility and a retail food outlet.

On May 3, 1996, Family Life Insurance Company, an indirect, 100%
owned subsidiary of FIC, purchased a tract of land adjoining the
Bridgepoint Office Square tract for a cash purchase price of $1.3
million. The property consists of 7.1 acres of land with one office
building site and one parking structure site. Family Life began
construction of the fifth  building (known as "Bridgepoint Five")
on the new site in January 1997. In May, 1997, the entire rentable
space (approximately 76,793 rentable square feet) contained in the
building was leased to a major tenant in the technology business.
Construction of the parking garage and the building shell was
completed in October, 1997.

On November 24, 1997, Investors-NA and Family Life entered into a
contract with Health and Retirement Properties Trust, a Maryland
real estate investment trust (the "Purchaser") to sell their
respective interests in the Bridgepoint Square Office complex. The
aggregate purchase price for the project was $78,000,000. The
transaction closed on December 5, 1997. The purchase price was
allocated approximately 78.5% to Investors-NA and 21.5% to Family
Life. The sale of Bridgepoint Office Square resulted in a net
profit to Investors-NA of approximately $14.0 million ($9.1 million
after tax) that is included in ILCO's fourth quarter earnings. For
Family Life, the sale resulted in a net profit of approximately
$4.5 million ($3.2 million after tax)that is included in FIC's
fourth quarter earnings.

Pursuant to the terms of the Bridgepoint Sale Agreement, Family
Life is obligated to complete the construction of and tenant
improvements in Bridgepoint Five. At the date on which the
transaction closed, the building and adjacent parking garage had
been completed. As of March, 1998, all tenant improvements had been
completed subject to final inspection.

ILCO leases a building located at 40 Parker Road, Elizabeth, New
Jersey. This building, which was formerly the Company's
headquarters building, contains approximately 41,000 square feet of
office space. The remaining term of the lease is 8 years, and the
lease calls for a minimum base rental of $450,000 per annum. The
lease provides that all costs including, but not limited to, those
for maintenance, repairs, insurance and taxes be borne by ILCO. The
Company has sub-leased the space in the property to third parties.

Investors-IN owns three buildings which are adjacent to the 40
Parker Road building. One building, which leased to third parties,
contains approximately 3,500 square feet of space. The second
building contains approximately 2,500 square feet of space and is
leased to persons who perform maintenance services for  Investors-
IN's and ILCO's properties in Elizabeth, New Jersey.  The third
building, purchased during 1985, contains approximately 3,500
square feet of space, and is  partially leased to third parties and
the remainder is used to provide accommodations for employees
working at the New Jersey office.

Investors-NA owns an office building, located at 206 West Pearl
Street, Jackson, Mississippi. This building is 67 years old and
contains approximately 85,000 square feet (65,000 net rentable
square feet) of office space. Investors-NA currently occupies a
nominal portion of the space in this property and leases space to
various commercial tenants.

The Company believes that its properties and leased space are
adequate to meet its foreseeable requirements.


Item 3. Legal Proceedings

The Company and Investors-NA are defendants in a lawsuit which was
filed in October, 1996, in Travis County, Texas. CIGNA Corporation,
an unrelated company, is also a named defendant in the lawsuit.
The named plaintiffs in the suit (a husband and wife), allege that
the universal life insurance policies sold to them by INA Life
Insurance Company (a company which was merged into Investors-NA in
1992) utilized unfair sales practices.  The named plaintiffs seek
reformation of the life insurance contracts and an unspecified
amount of damages.  The named plaintiffs also seek a class action
as to similarly situated individuals.  No certification of a class
has been granted as of the date hereof.  The Company believes that
the suit is without merit and intends to vigorously defend this
matter.


In August, 1997, another individual filed a similar action in
Travis County, Texas against the corporate entities identified
above.  The lawsuit involves the same type of policy and includes
allegations which are substantially identical to the allegations in
the first action. The named plaintiff also seeks class
certification. The Company believes that the court would consider
class certification with respect to only one of these actions. The
Company also believes that this action is without merit and intends
to vigorously defend this matter.


Item 4. Submission of Matters to a Vote of Security Holders

No matter was submitted during the fourth quarter of the fiscal
year ended December 31, 1997 to a vote of security holders.

                                  PART II

Item 5.  Market for the Registrant's Common Stock and Related
         Stockholder Matters


A. Market Information

The following table sets forth the quarterly high and low sales
prices for the Company's Common Stock in The Nasdaq Small-Cap
Market for 1997 and 1996.


     Prices
                                        High      Low

1997:

1st Quarter. . . . . . .                $15.00    $13.00
2nd Quarter. . . . . . .                 15.00     12.25
3rd Quarter. . . . . . .                 20.375    14.75
4th Quarter. . . . . . .                 24.25     19.00

1996:

1st Quarter. . . . . . .                $15.50    $12.50
2nd Quarter. . . . . . .                 16.25     13.375
3rd Quarter. . . . . . .                 15.25     11.50
4th Quarter. . . . . . .                 14.25     12.00

The Common Stock of the Company is traded in The Nasdaq Small-Cap
Market (NASDAQ Symbol: ILC0). Quotations are furnished by the
National Association of Securities Dealers Automated Quotation
System (NASDAQ).

B. Holders

The approximate number of record holders of the Common Stock of the
Registrant as of March 16, 1998 was 1,456.

C. Dividends

No dividend was declared or paid by the Company during 1995, 1996
or 1997. Under the terms of its Senior Loan the Company is not
permitted to declare or pay any dividends on its Common Stock
during the loan term. A more detailed discussion of the Senior Loan
is set forth in Item 1 hereof.

The ability of an insurance holding company, such as ILCO, to pay
dividends to its shareholders may be limited by the company's
ability to obtain revenue, in the form of dividends and other
payments, from its operating insurance subsidiaries. The right of
such subsidiaries to pay dividends is generally restricted by the
insurance laws of their domiciliary states. See Item 1. Business -

Regulation - Surplus Debentures and Dividends.


Item 6. Selected Financial Data (in thousands, except per share
data.)


                               Years Ended December 31,


                 1997      1996        1995       1994      1993

Revenues     $127,683   $ 138,244   $ 122,390 $ 114,842  $ 117,843

Benefits &
Expenses       96,081      96,801     105,907    99,142    100,525

Income from
operations     31,602      41,443      16,483    15,700     17,318

Provision for
federal income
taxes          11,062      14,505       5,769     5,783      5,118

Net Income
before extra-
ordinary item
and cumulative
effect of
change in
accounting
principle      20,540      26,938      10,714     9,917     12,200

Extraordinary
Item              -0-         -0-         -0-       -0-    (6,253)

Net Income
before
cumulative
effect of
change in
accounting
principle      20,540      26,938      10,714     9,917      5,947

Cumulative
effect of
change in
accounting
principle         -0-         -0-         -0-       -0-    (2,600)

Net Income $   20,540   $  26,938   $  10,714 $   9,917  $   3,347

Common
Stock and
Common  Stock
Equivalents     4,369       4,441       4,342     4,473      4,538

Net Income per
share before
extraordinary
item and
cumulative
effect of
change in
accounting
principle
  Basic      $   4.75    $   6.36    $   2.57  $   2.41   $   2.97
  Diluted    $   4.70   $    6.07   $    2.47  $   2.22   $   2.69


Extraordinary
Item
  Basic           -0-         -0-         -0-       -0-     (1.52)
  Diluted         -0-         -0-         -0-       -0-     (1.38)


Net income per
share before
cumulative
effect of
change in
accounting
principle
  Basic          4.75        6.36       2.57       2.41      1.45
  Diluted        4.70        6.07       2.47       2.22      1.31


Cumulative
effect of
change in
accounting
principle
  Basic           -0-         -0-        -0-        -0-     (.63)
  Diluted         -0-         -0-        -0-        -0-     (.57)

Net income per
share

Basic           $4.75       $6.36      $2.57      $2.41     $0.82
Diluted         $4.70       $6.07      $2.47      $2.22     $0.74

Cash Dividend     -0-         -0-        -0-        -0-       -0-

Long Term
Debt         $ 10,964  $   24,944 $   59,385 $   66,585$   84,000

Total
Assets     $1,321,653  $1,263,942 $1,315,293 $1,148,994$1,266,941



Net Income per share for the year 1993 to 1996 has been restated to
reflect the effect of FAS 128.

Item 7.         Management's Discussion and Analysis of Financial Condition
                and Results of Operations

For the year ended December 31, 1997, ILCO's net income from operations
was $20,540,000 ($4.70 per common share) as compared to $26,938,000
($6.07 per common share) in 1996, and $10,714,000 ($2.47 per common
share) in 1995. Earnings per share are stated on a diluted basis, in
accordance with the requirements of FAS 128, which requires that diluted
earnings per share reflect the potential dilution that would occur if
securities or other contracts to issue common stock were converted or
exercised.  For the years 1996 and 1995, earnings per share have been
restated to reflect the effect of FAS No.128.


                            Results of Operations

Net income from continuing operations (excluding the gain resulting from
the sale of Bridgepoint Square Offices in 1997 and the sale of the
Austin Centre in 1996, as described below) was $11,443,000 ($2.62 per
common share) for the year ended December 31, 1997, $11,650,000 ($2.62
per common share) for the year ended December 31, 1996 and $10,714,000
($2.47 per common share) for the year ended December 31, 1995.

Net income for 1997 includes $9.1 million resulting from the sale of the
Bridgepoint Square Offices, an office complex located in Austin, Texas.
The selling price was $78 million, which was allocated approximately
78.5% to Investors-NA ($61.3 million). The sale closed on  December 5,
1997. As part of the decision to sell the Bridgepoint properties, the
Company cancelled its plans to move its headquarters to  one of the
Bridgepoint buildings and entered into a new lease at the Austin Centre.
Under the provisions of the lease, Investors-NA received a payment from
the owner of the Austin Centre in the amount of $1.7 million.  That
amount is included in net income for the year ended December 31, 1997.

Net income for 1996 includes $15.3 million resulting from the sale of
the Austin Centre, a hotel/office complex, located in Austin, Texas.
The selling price was $62.67 million, less $1 million paid to a capital
reserve account for the purchaser.  The sale closed on March 29, 1996.

The results for 1997, 1996 and for that portion of 1995 beginning on
February 14th, include the operations of Investors Life Insurance
Company of Indiana (formerly known as Meridian Life Insurance Company
and referred to herein as "Pre-Merger Investors-IN" for purposes of
identifying the entity prior to the December 1997 merger transaction
described below).  Pre-Merger Investors-IN was purchased by ILCO and
Investors Life Insurance Company of North America ("Investors-NA") for
an adjusted purchase price of $17.1 million; the transaction was
completed on February 14, 1995.  The name change was completed in May,
1995.

The results for 1997 include, for the period beginning on July 9th, the
operations of State Auto Life Insurance Company.  That company was
acquired from State Automobile Mutual Insurance Company, for an adjusted
cash purchase price of $11.8 million. In connection with this
transaction, the bank group participating in the ILCO Senior Loan
agreed to defer payment of $4.5 million  otherwise payable on April 1,
1997 under the terms of the Senior Loan, and to reduce the amount of the
payment otherwise due on July 1, 1997 by $2.5 million.  This deferral
resulted in extending the maturity date of the Senior Loan to October 1,
1998.  Under the terms of the transaction, State Auto Life was merged
into Pre-Merger Investors-IN.  The closing of the transaction took place
on July 9, 1997.

In December, 1997, ILIC, an indirect subsidiary of the Company,
transferred its domicile from New Jersey to Indiana.  Following
completion of the redomestication, ILIC merged with Pre-Merger
Investors-IN, with ILIC as the surviving entity in the merger process.
Immediately after the merger, ILIC changed its name to Investors Life
Insurance Company of Indiana.  As used hereinafter, the phrase
"Investors-IN" shall be used to refer to the merged entities.  As a
result of the merger, Investors-IN is licensed in 44 states. As of
December 31, 1997, it had assets of $153.8 million and capital and
surplus of $23.1 million.

The statutory earnings of the Company's insurance subsidiaries, as
required to be reported to insurance regulatory authorities, before
interest expense, capital gains and losses, and federal income taxes
were $19,681,000 at December 31, 1997, as compared to $21,965,000 at
December 31, 1996, and $24,511,342 at December 31, 1995.  These
statutory earnings are the source to provide for the repayment of ILCO's
indebtedness.

The operating strategy of the Company's management emphasizes several
key objectives: expense management; marketing of competitively priced
insurance products which are designed to generate an acceptable level of
profitability; maintenance of a high quality portfolio of investment
grade securities; and the provision of quality customer service.

Premium income, net of reinsurance, for the year 1997 was $18.8
million, as compared to $9.98 million in 1996, and $11.69 million in
1995.  Reinsurance premiums ceded were $10.4 million in 1997, as
compared to $8.0 million in 1996 and $8.5 million in 1995.  For the year
1997, ceded reinsurance includes the results of the sale of the accident
and health and disability income insurance business of the Company's
life insurance subsidiaries.  In December, 1997, ILCO s life insurance
subsidiaries entered into a reinsurance treaty under which all of the
contractual obligations and risks under accident and health and
disability income insurance policies were assumed by a third party
reinsurer.  These risks and contractual obligations were sold pursuant
to, first, a coinsurance reinsurance agreement. Following applicable
regulatory approvals, the reinsurer will assume the direct obligations
of the companies, on an assumption reinsurance basis.  The decision to
dispose of this book of business was based on management s analysis that
the business was not generating targeted profit objectives and that the
products were not part of the core business of the subsidiaries.  The
sale permits the companies to focus on its primary business - life
insurance and annuity sales.  In connection with the transaction, the
total amount of net reserves transferred by the subsidiaries was
$6,327,504. In addition to the transfer of reserves, the life companies
paid the reinsurer $1,037,150 in connection with the transaction, which
amount was accounted for as an expense for the year ended December 31,
1997. In 1997, the  transferred business generated approximately
$791,000 in annualized premiums.

Earned insurance charges for the year ended December 31, 1997 were
$40.9 million, as compared to $42.24 million for 1996 and $42.32 million
for 1995.  This source of revenues is related to the universal life
insurance and annuity book of business of Investors-NA.

In 1995, Investors-NA entered into a reinsurance agreement with Family
Life Insurance Company (an insurance company subsidiary of Financial
Industries Corporation and an affiliated  company of Investors-NA),
pertaining to universal life insurance written by Family Life.  The
reinsurance agreement is on a co-insurance basis and applies to all
covered business with effective dates on and after January 1, 1995.  The
agreement applies to only that portion of the face amount of the policy
which is less than $200,000; face amounts of $200,000 or more are
reinsured by Family Life with a third party reinsurer.  In 1996,
Investors-NA entered into a reinsurance agreement with Family Life,
pertaining to annuity contracts written by Family Life. The agreement
applies to contracts written on or after January 1, 1996. These
reinsurance arrangements reflect management's plan to develop universal
life and annuity business at Investors-NA, with Family Life
concentrating on the writing of term life insurance products.

Interest expense was $1.7 million for the year 1997, as compared to $2.8
million for the year 1996, and $5.7 million for the year 1995. The
decrease is attributable to a reduction in the average principal balance
of the Senior Loan from $64.4 million for the year ending December 31,
1995 to $33.7 million for the year ending December 31, 1996 and $18.5
million for the year ending December 31, 1997, as well as a decrease in
the average rate of interest paid on the senior loan - 7.68% for the
year 1997, as compared to 7.76% for the year 1996 and 8.63% for the year
1995.

The decline in long-term interest rates during 1997, which was related
to general economic conditions, had a positive effect upon the market
value of the fixed maturities available for sale segment of the
portfolio.  As of December 31, 1997, the market value of the fixed
maturities available for sale segment was $454.5 million as compared to
an amortized cost of $436.8 million, or an unrealized gain of $17.7
million.  The net of tax effect of this increase has been recorded as an
increase in shareholders' equity.  There is no assurance that this
unrealized gain will be realized in the future.

At the annual meeting of shareholders, which was held on June 17, 1997,
the shareholders approved  the redomestication of the ILCO from the
State of New Jersey to the State of Texas.  The redomestication was
implemented by a merger of the Company into a Texas-domiciled company
(ILCO-Texas) and, following the merger, changing the name of ILCO-Texas
to InterContinental Life Corporation.

For the year ended December 31, 1997, the Company's income from
operation before Federal income taxes was $31,602,000 on revenues of
$127,683,000, as compared to $41,443,000 on revenues of $138,244,000 for
the year 1996, and $16,483,000 on revenues of $122,390,000 in 1995.

During 1997, the lapse rate with respect to universal life insurance
policies decreased slightly from the lapse rate experienced in 1996.
The rate in 1997 was 8.9%, as compared to 9.0% in 1996. The lapse rate
with respect to traditional (non-universal) life insurance policies
increased slightly from the levels experienced in 1996.  The rate in
1997 was 8.9% as compared to 8.0% in 1996.   The lapse rates experienced
during the 1997 period were within the ranges anticipated by management.


                        Liquidity and Capital Resources:

ILCO is a holding company whose principal assets consist of the common
stock of Investors Life Insurance Company of North America and its
subsidiary - Investors Life Insurance Company of Indiana (formerly
InterContinental Life Insurance Company).  ILCO's primary source of
funds consists of payments under two Surplus Debentures from Investors-
NA.

As of December 31, 1996, the outstanding principal balance of  ILCO's
senior loan obligations was $24.9 million.  The Company made scheduled
principal payments under its senior loan on January 1, 1997 and July 1,
1997, reducing the principal balance to $11.0 million at December 31,
1997.

ILCO's principal source of liquidity consists of the periodic payment of
principal and interest by Investors-NA, pursuant to the terms of the
Surplus Debentures.  The Surplus Debentures were originally issued by
Standard Life Insurance Company and their terms were previously approved
by the Mississippi Insurance Commissioner.  Upon the merger of Standard
Life into Investors-NA, the obligations of the Surplus Debentures were
assumed by Investors-NA.  As of December 31, 1997, the outstanding
principal balance of the Surplus Debentures was $5.2 million and $22.6
million, respectively.  Since Investors-NA is domiciled in the State of
Washington, the provisions of Washington insurance law apply to the
Surplus Debentures.  Under the provisions of the Surplus Debentures and
current law, no prior approval of the Washington Insurance Commissioner
is required for Investors-NA to pay interest or principal on the Surplus
Debentures; provided that, after giving effect to such payments, the
statutory surplus of Investors-NA is in excess of $10 million (the
"surplus floor").  However, Investors-NA has voluntarily agreed with the
Washington Insurance Commissioner that it will provide at least five
days advance notice of payments which it will make under the surplus
debenture. As of December 31, 1997, the statutory surplus of
Investors-NA was $71.5 million, an amount substantially in excess of the
surplus floor.  The funds required by Investors-NA to meet its
obligations to the Company under the terms of the Surplus Debentures are
generated from operating income generated from insurance and investment
operations.

In addition to the payments under the terms of the Surplus Debentures,
ILCO has received dividends from Standard Life (now, from Investors-NA).
Washington's insurance code includes the "greater of" standard for
payment of dividends to shareholders, but has a requirement that prior
notification of a proposed dividend be given to the Washington Insurance
Commissioner and that cash dividends may be paid only from earned
surplus. As of December 31, 1997, Investors-NA had earned surplus of
$32.9 million. Since the law applies only to dividend payments, the
ability of Investors-NA to make principal and interest payments under
the Surplus Debentures is not affected.  ILCO does not anticipate that
Investors-NA will have any difficulty in making principal and interest
payments on the Surplus Debentures in the amounts necessary to enable
ILCO to service the Senior Loan for the foreseeable future.

Investors-IN is domiciled in the State of Indiana. Under the Indiana
insurance code, a domestic insurer may make dividend distributions upon
proper notice to the Department of Insurance, as long as the
distribution is reasonable in relation to adequate levels of
policyholder surplus and quality of earnings. Under Indiana law the
dividend must be paid from earned surplus. Extraordinary dividend
approval would be required where a dividend exceeds the greater of 10%
of surplus or the net gain from operations for the prior fiscal year.
Investors-IN had earned surplus of $18.1 million at December 31, 1997.

ILCO's net cash flow provided by (used in) operating activities was
$3.96 million, as compared to ($23.46) million for the year ended
December 31, 1996 and $10.3 million for the same period in 1995.  This
change is primarily due to fluctuations in the amount of deferred
federal income tax related to the market value of investment assets that
are fixed maturities available for sale and the net gain realized in
connection with the sale of the Austin Centre.

Management believes that its cash, cash equivalents and short term
investments are sufficient to meet the needs of its business and to
satisfy debt service.

                                  Investments

As of December 31, 1997, the book value of the Company's investment
assets totaled $693.1 million, as compared to $661.1 million as of
December 31, 1996.  Total assets as of December 31, 1997 ($1.32
billion) increased from the level as of December 31, 1996 ($1.26
billion).

The level of short-term investments at the end of 1997 was $164.6
million, as compared to $91.6 million at the end of 1996.

Invested real estate and other invested assets decreased from $38.7
million at December 31, 1996 to $1.3 million as of December 31, 1997.
This decrease is attributable to the sale of the Bridgepoint Square
Offices property by Investors-NA.

The fixed maturities available for sale portion of invested assets at
December 31, 1997 was $454.5 million.  The amortized cost of the fixed
maturities available for sale segment as of December 31, 1997 was $436.8
million, representing a net unrealized gain of $17.7 million.  This
unrealized gain principally reflects changes in interest rates from the
date the respective investments were purchased.  To reduce the exposure
to interest rate changes, portfolio investments are selected so that
diversity, maturity and liquidity factors approximate the duration of
associated policyholder liabilities.

The assets held by ILCO's life insurance subsidiaries must comply with
applicable state insurance laws and regulations.  In selecting
investments for the portfolios of its life insurance subsidiaries, the
Company's emphasis is to obtain targeted profit margins, while
minimizing the exposure to changing interest rates.  This objective is
implemented by selecting primarily short- to medium-term, investment
grade fixed income securities.  In making such portfolio selections, the
Company generally does not select new investments which are commonly
referred to as "high yield" or "non-investment grade."

The Company's fixed maturities portfolio (including short-term
investments), as of December 31, 1997, included a non-material amount
(0.9% of total fixed maturities and short-term investments) of debt
securities which, in the annual statements of the companies as filed
with state insurance departments, were designated under the National
Association of Insurance Commissioners ("NAIC") rating system as "3"
(medium quality) or below.  For the year ended December 31, 1996, the
comparable percentage was 1.1%.  The majority of these non-investment
grade investments are concentrated in the medium quality (or "3")
category, with only 0.7% receiving an NAIC rating of "4" (low quality)
or below as of December 31, 1997, as compared to 0.7% as of December 31,
1996.

The consolidated balance sheets of the Company as of December 31, 1997
include $53.79 million of "Notes receivable from affiliates",
represented by (i) a loan of $22.5 million from Investors-NA to Family
Life Corporation and a $2.5 million loan from Investors-CA to Financial
Industries Corporation (which is now owned by Investors-NA as a result
of the merger of Investors-CA into Investors-NA) and $2.0 million of
additions to the $2.5 million note made in accordance with the terms of
such note; these loans were granted in connection with the 1991
acquisition of Family Life Insurance Company by a wholly-owned
subsidiary of FIC (ii) a loan of $30 million by Investors-NA to Family
Life Corporation made in July, 1993, in connection with the prepayment
by the FIC subsidiaries of indebtedness which had been previously issued
to Merrill Lynch as part of the 1991 acquisition and (iii) a loan of
$4.5 million by Investors-NA to Family Life Insurance Investment Company
made in July, 1993, in connection with the same transaction described
above.

As of June 12, 1996, the provisions of the notes from Investors-NA to
FIC, FLC and FLIIC were modified as follows: (a) the $22.5 million note
was amended to provide for twenty quarterly principal payments, in the
amount of $1,125,000 each, to commence on December 12, 1996; the final
quarterly principal payment is due on September 12, 2001; the interest
rate on the note remains at 11%, (b) the $30 million note was amended to
provide for forty quarterly principal payments, in the amount of
$163,540 each for the period December 12, 1996 to September 12, 2001;
beginning with the principal payment due on December 12, 2001, the
amount of the principal payment increases to $1,336,458;  the final
quarterly principal payment is due on September 12, 2006; the interest
rate on the note remains at 9%, (c) the $4.5 million note was amended to
provide for forty quarterly principal payments, in the amount of $24,531
each for the period December 12, 1996 to September 12, 2001; beginning
with the principal payment due on December 12, 2001, the amount of the
principal payment increases to $200,469;  the final quarterly principal
payment is due on September 12, 2006; the interest rate on the note
remains at 9%, (d) the $2.5 million note was amended to provide that the
principal balance of the note is to be repaid in twenty quarterly
installments of $125,000 each, commencing December 12, 1996 with the
final payment due on September 12, 2001; the rate of interest remains at
12%, (e) the Master PIK note, which was issued to provide for the
payment in kind of interest due under the terms of the $2.5 million note
prior to June 12, 1996, was amended to provide that the principal
balance of the note ($1,977,119) is to be paid in twenty quarterly
principal payments, in the amount of $98,855.95 each, to commence
December 12, 1996 with the final payment due on September 12, 2001; the
interest rate on the note remains at 12%.

The NAIC continued its rating of "3" to the "Notes receivable from
affiliates", as amended.  These loans have not been included in the
preceding description of NAIC rating percentages.

Management believes that the absence of any material amounts of "high-
yield" or "non-investment grade" investments (as defined above) in the
portfolios of its life insurance subsidiaries enhances the ability of
the Company to service its debt, provide security to its policyholders
and to credit relatively consistent rates of return to its
policyholders.


                              Year 2000 Compliance

The Company and its subsidiaries utilize a centralized computer system
to process policyholder records and financial information.  In addition,
the Company uses non-centralized computer terminals  in connection with
its operations.  The software programs used in connection with these
systems will be affected by what is referred to as the "year 2000
problem".  This refers to the limitations of the programming code in
certain existing software programs to recognize date sensitive
information as the year 2000 approaches.  Unless modified prior to the
year 2000, such  systems may not properly recognize such information and
could generate erroneous data or cause a system to fail to operate
properly.

The Company has evaluated its centralized computer systems and has
developed a plan to reach  year 2000 compliance.  A central feature of
the Plan is to convert most of the centralized systems to a common
system which is already in compliance with year 2000 requirements.  The
Company is in the process of this systems conversion and anticipates
that the project will be completed in advance of the year 2000.

The Plan calls for a conversion of certain systems onto the Company's
CK/4 System; a system which is designed to be Y2K compliant according to
the representations of the vendor. Those systems which are not converted
will be upgraded by changing individual lines of computer code in order
to modify current operating software such that it will become Y2K
compliant.

Under the Plan, the Company will utilize its own personnel and personnel
of its affiliated company, FIC Computer Services, Inc., acquire Y2K
compliant operating software, and engage the assistance of outside
consultants to facilitate the systems conversions and modifications. The
Company has budgeted approximately $470,000 for implementation of the
Plan. In the event that the Plan does not achieve full compliance by the
target dates, or if unforeseen matters involving Y2K appear before or
after January 1, 2000, the Company will utilize the staff of FIC
Computer Services to identify and resolve such issues as and if they
arise.

In order to continuously evaluate the effectiveness of the modifications
and conversions made to the various systems, FIC Computer Services has
acquired testing software to simulate dates on or after January 1, 2000.
Additionally, FIC Computer Services runs the systems through model
office cycles and also conducts visual inspections of screen displays to
determine whether the systems are functioning in a Y2K compliant manner.

As of February 1, 1998, the Company estimated that it had completed the
necessary conversions and modifications on the administrative systems
which process approximately 35% of the insurance policies for the
Company and its subsidiaries. This included the conversion of the ALIS
System (administering approximately 49,280 policies) to CK/4 in January
of 1998. The TI System (administering approximately 5,244 policies) will
be converted to CK/4 in May, 1998, bringing the total to approximately
38%. The conversion of the Life 70 system (administering approximately
17,285 policies for Investors-IN) is scheduled for completion in April,
1999. The modification of the Lifecomm-B system which is responsible for
the 19,205 policies assumed after the acquisition of State Auto Life is
also scheduled for completion in April, 1999. The conversion of the
Lifecomm-A system (administering approximately 65,266 policies for
Investors-NA) is now scheduled for completion in September of 1999. The
modification of three non-material systems which administer 6,806 credit
life policies, 2,514 group certificates and 15,938 industrial life
policies are scheduled for completion in December of 1998, March of 1999
and June of 1999 respectively.

The various software applications described above are licensed to the
Company under agreements which permit the Company's subsidiaries to
process business on its computer systems utilizing such software.

In 1997, FIC Computer Services purchased new mainframe hardware and
accompanying operating software, which the vendor has represented to be
Y2K compliant.  This hardware and software will be tested in 1998. The
telephone system has been tested by the maintenance provider for that
system and the Company has received assurances that the telephone system
is Y2K compliant.

With respect to non-centralized systems(i.e., desktop computers), the
Company anticipates that updated software releases will be commercially
available well in advance of the year 2000. Accordingly, to the extent
that such systems rely on date sensitive information, the Company
expects that the effort needed to correct for year 2000 problems will be
less time intensive than the effort needed to achieve compliance for its
centralized systems.


                            Accounting Developments

In February 1997, the Financial Accounting Standards Board (FASB) issued
Financial Accounting Standard (FAS) No. 128, "Earnings Per Share," which
revises the standards for computing earnings per share previously
prescribed by APB Opinion No. 15, "Earnings Per Share."  The Statement
establishes two measures of earnings per share:  basic earnings per
share and diluted earnings per share.  Basic earnings per share is
computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
converted or exercised.  The Statement requires dual presentation of
basic and diluted earnings per share on the face of the income statement
for all entities with potential dilutive securities outstanding.  The
Statement also requires a reconciliation of the numerator and
denominator of the basic earnings per share computation to the numerator
and denominator of the diluted earnings per share computation.

The Statement is effective for interim and annual periods ending after
December 15, 1997.  Earlier application is not permitted.  However, a
company may disclose pro forma earnings per share amounts that would
have resulted if it had applied the Statement in an earlier period. The
Company adopted FAS 128 in its annual financial statements for the year
ended December 31, 1997.

In June, 1997, the FASB issued FAS No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of
comprehensive income and its components in a financial statement with
the same prominence as other financial statements.  Comprehensive income
is defined as net income adjusted for changes in stockholders' equity
resulting from events other than net income or transactions related to
an entity's capital instruments.  The Company is required to adopt FAS
130 effective January 1, 1998, with reclassification of financial
statements for earlier years required.

In June, 1997, the FASB issued FAS 131, "Disclosure About Segments
of an Enterprise and Related Information", which establishes standards
for reporting information about operating segments.  Generally, FAS 131
requires that financial information be reported on the basis that it is
used internally for evaluating performance.  The Company is required to
adopt FAS 131 effective January 1, 1998 and comparative information for
earlier years must be restated.  This statement does not need to be
applied to interim financial statements in the initial year of
application. The Company is currently considering the impact, if any, of
FAS 131 on its current reporting structure.

In February, 1998, the FASB issued FAS 132, "Employers' Disclosures
About Pensions and Other Postretirement Benefits", which revises current
disclosure requirements for employers' pension and other retiree
benefits.  FAS 132 does not change the measurement or recognition of
pension or other postretirement benefit plans.  The Company is required
to adopt FAS 132 effective January 1, 1998, with restatement of
disclosures for earlier years required.

In December, 1997, the Accounting Standards Executive Committee issued
Statement of Position ("SOP") 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments", which provides guidance
on accounting for insurance-related assessments.  The Company is
required to adopt SOP 97-3, effective January 1, 1999.  Previously
issued financial statements should not be restated unless the SOP is
adopted prior to the effective date and during an interim period.  The
adoption of SOP 97-3 is not expected to have a material impact on the
Company's results of operations, liquidity or financial position.

Item 8. Financial Statements and Supplementary Data

The following Financial Statements of ILCO and its consolidated
subsidiaries have been filed as part of this report:

1.  Report of Price Waterhouse LLP, Independent Accountants, dated March
    27, 1998.

2.  Consolidated Balance Sheets, as of December 31, 1997 and December
    31, 1996.

3.  Consolidated Statements of Income for the years ended December 31,
    1997, 1996 and 1995.

4.  Consolidated Statements of Changes in Shareholders' Equity for the
    years ended December 31, 1997, 1996 and 1995.

5.  Consolidated Statements of Cash Flows for the years ended December
    31, 1997, 1996 and 1995.

6.  Notes to Consolidated Financial Statements.


Item 9.         Changes in and Disagreements with Accountants on Accounting
                and Financial Disclosure

No independent accountant who audited the Registrant's financial
statements has resigned or been dismissed during the two most recent
fiscal years.

                                    PART III

Item 10.        Directors and Executive Officers of Registrant

                (a) Directors of the Registrant

The names and ages of the current directors of the Registrant, their
principal occupations or employment during the past five years and other
data regarding them are set forth below. Except for Mr. Bender, who was
appointed by the Board of Directors in October, 1997, to fill a vacancy,
all of the directors were elected at the 1997 annual shareholders
meeting. The data supplied below is based on information provided by the
directors, except to the extent that such data is known to the
Registrant.

                Age  Director           Principal Occupation
Name                                      Since    and Other Information

Robert A. Bender    44     1997  Director of ILCO since October, 1997.
                                 Vice President of Family Life
                                 Insurance Company since January 1997.
                                 Vice President of Investors Life
                                 Insurance Company of North America
                                 since January 1997.  Vice President
                                 of Investors-IN, formerly known as
                                 InterContinental Life Insurance
                                 Company since January 1997.
                                 Assistant Vice President of Investors
                                 Life Insurance Company of North
                                 America form February 1994 to January
                                 1997.  Assistant Vice President of
                                 Investors-Indiana from February 1994
                                 to January 1997.  Assistant Vice
                                 President of Investors-IN, formerly
                                 known as InterContinental Life
                                 Insurance Company from February 1994
                                 to January 1997.  Assistant Vice
                                 President of Family Life Insurance
                                 Company from February 1994 to January
                                 1997.  Retired from 22 years of
                                 service in the U.S. Army on February
                                 1994.

Jeffrey H. Demgen   45     1995  Director of FIC since May 1995.  Vice
                                 President of FIC since August 1996.
                                 Vice President and Director of ILCO
                                 since August 1996.  Director of FIC
                                 since May 1995.  Executive Vice
                                 President and Director of Family Life
                                 Insurance Company since August 1996.
                                 Senior Vice President and Director of
                                 Family Life Insurance Company from
                                 October 1992 to August 1996.
                                 Executive Vice President and Director
                                 of Investors Life Insurance Company
                                 of North America since August 1996.
                                 Senior Vice President and Director of
                                 Investors Life Insurance Company of
                                 North America from October 1992 to
                                 June 1995. Executive Vice President
                                 of Investors-IN, formerly known as
                                 InterContinental Life Insurance
                                 Company since August 1996.  Senior
                                 Vice President of Investors-IN,
                                 formerly known as InterContinental
                                 Life Insurance Company from October
                                 1992 to June 1995.  Executive Vice
                                 President and Director of Investors-
                                 Indiana from August 1996 to December
                                 1997.  Senior Vice President of
                                 United Insurance Company of America
                                 from September 1984 to July 1992.

Theodore A. Fleron  58     1991  Vice President and Director of ILCO
                                 since May 1991.  Assistant Secretary
                                 since June 1990.  Vice President and
                                 Director of FIC since August 1996.
                                 Senior Vice President, General
                                 Counsel, Assistant Secretary and
                                 Director of Investors Life Insurance
                                 Company of North America and
                                 Investors-IN, formerly known as
                                 InterContinental Life Insurance
                                 Company since July 1992.  General
                                 Counsel, Assistant Secretary and
                                 Director of Investors Life Insurance
                                 Company of North America and
                                 Investors- IN, formerly known as
                                 InterContinental Life Insurance
                                 Company from January 1989 to July
                                 1992.  Senior Vice President, General
                                 Counsel, Director and Assistant
                                 Secretary of Investors-Indiana from
                                 June 1995 to December 1997.  Senior
                                 Vice President, General Counsel,
                                 Director and Assistant Secretary of
                                 Family Life Insurance Company since
                                 August 1996.


W. Lewis Gilcrease  66     1988  Dentist practicing in San Marcos,
                                 Texas.  Director of ILCO since 1988.
                                 Director of FIC from 1979 to July 6,
                                 1991.

James M. Grace      54     1984  Vice President and Treasurer of the
                                 Company since January, 1985.
                                 Executive Vice President, Treasurer
                                 and Director of Investors-IN,
                                 formerly known as InterContinental
                                 Life Insurance Company since 1989.
                                 Vice President, Treasurer and
                                 Director of Financial Industries
                                 Corporation since July, 1976.
                                 Executive Vice President and
                                 Treasurer of Investors Life Insurance
                                 Company of North America since 1989;
                                 Executive Vice President, Treasurer
                                 and Director of Family Life Insurance
                                 Company (a subsidiary of Financial
                                 Industries Corporation) since June
                                 1991.  Director, Executive Vice
                                 President and Treasurer of Investors-
                                 Indiana from February 1995 to
                                 December 1997.

Richard A. Kosson   65     1981  Certified Public Accountant and a
                                 partner in the firm of Manheim,
                                 Kosson & Novick in Millburn, New
                                 Jersey.  Director of ILCO since 1981.

Roy F. Mitte        66     1984  Chairman of the Board and Chief
                                 Executive Officer of the Company and
                                 Investors-IN formerly known as
                                 InterContinental Life Insurance
                                 Company since January, 1985.
                                 President of the Company since April,
                                 1985.  Chairman of the Board,
                                 President and Chief Executive Officer
                                 of Financial Industries Corporation
                                 since 1976.  Chairman of the Board,
                                 President and Chief Executive Officer
                                 of Investors Life Insurance Company
                                 of North America since December,
                                 1988.  Chairman of the Board,
                                 President and Chief Executive Officer
                                 of Family Life Insurance Company
                                 since June 1991.  Chairman of the
                                 Board, President and Chief Executive
                                 Officer of Investors-Indiana from
                                 February 1995 to December 1997.
                                 Chairman, ILG Securities Corporation
                                 since December 1988.

Eugene E. Payne     55     1989  Vice President of ILCO since December
                                 1988 and Director and Secretary since
                                 May 1989.  Vice President and
                                 Director of Financial Industries
                                 Corporation since February 1992.
                                 Executive Vice President, Secretary
                                 and Director of Investors Life
                                 Insurance Company of North America
                                 since December 1988.  Executive Vice
                                 President since December 1988 and
                                 Director since May 1989 of Investors-
                                 IN, formerly known as
                                 InterContinental Life Insurance
                                 Company.  Executive Vice President,
                                 Secretary and Director of Family Life
                                 Insurance Company since June 1991.
                                 Director, Executive Vice President
                                 and Secretary of Investors-Indiana
                                 from February 1995 to December 1997.

H. Gene Pruner      69     1995  Director of ILCO since August 1996.
                                 Director of Investors-IN since
                                 February, 1995.  President of Market
                                 Share, Inc. since April 1985.

Steven P. Schmitt   51     1994  Senior Vice President since April
                                 1992 and Director, Vice President and
                                 Assistant Secretary since August 1989
                                 of Investors Life Insurance Company
                                 of North America and Investors-IN,
                                 formerly known as InterContinental
                                 Life Insurance Company.  Senior Vice
                                 President since April 1992 and
                                 Director and Vice President since
                                 June 1991 of Family Life Insurance
                                 Company.  Director, Senior Vice
                                 President and Assistant Secretary of
                                 Investors-Indiana from  June 1995 to
                                 December 1997.

Donald Shuman       72     1980  Real estate specialist, engaged in
                                 sales and management of real estate
                                 for his own company, Don Shuman
                                 Associates, a real estate brokerage
                                 and management firm.

Mr. Shuman was the general partner of Shuman-Carlisle Mall Associates,
a partnership that owned a 400,000 square foot shopping mall located in
Carlisle, Pennsylvania.  In January 1993, the partnership filed a
petition pursuant to Chapter 11 of the Federal Bankruptcy Code, and that
bankruptcy proceeding was concluded in early 1995.

The incumbent directors, except for Mr. Shuman,  have been nominated for
submission to vote of the shareholders for reelection at the 1998 annual
shareholders' meeting.

(b)  Executive Officers of the Registrant

The following table sets forth the names and ages of the persons who
have served as Registrant's Executive Officers during 1997 together with
all positions and offices held by them with the Registrant.  Officers
are elected to serve at the will of the Board of Directors or until
their successors have been elected and qualified.


Name                       Age   Positions and Offices

Roy F. Mitte        66        Chairman of the Board,
                              President and Chief Executive Officer

James M. Grace      54        Vice President and Treasurer

Eugene E. Payne     55        Vice President and Secretary

Joseph F. Crowe(1)  59        Vice President

Jeffrey H. Demgen   45        Vice President


In May 1991, Roy F. Mitte suffered a stroke, resulting in partial
paralysis affecting his speech and mobility.  Mr. Mitte continues to make
the requisite decisions in his capacity as Chief Executive Officer,
although his ability to communicate and his mobility are impaired.

1.  Mr. Crowe retired from active service with the Company as of January
3, 1997.  He continued to serve on the Board of Directors until October,
1997, when he resigned from the ILCO Board in order to devote his efforts
to the Board activities of FIC.

(c)    Identification of certain significant employees

       Not Applicable.

(d)    Family relationships

       Not Applicable.

(e)    Business experience

      All of the executive officers of the Company are members of the
       Board of Directors and their business experience has been outlined
      in Item 10(a).

(f)   Compliance with Section 16(a) of the Securities Exchange Act of
      1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of beneficial ownership on Form 3 and changes in beneficial
ownership on Forms 4 and 5 with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.  Based solely on review of the copies of
such forms furnished to the Company, or written representations that no
Forms 5 were required, the Company believes that for the period from
January 1, 1997 through December 31, 1997 all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-
percent beneficial owners were complied with, except as follows:  Robert
A. Bender filed a Form 5 in February, 1998, to report his appointment as
a Director of the Company as of October 10, 1997.

Item 11. Executive Compensation

Summary Compensation Table

The following table sets forth information concerning the compensation of
the Company's Chief Executive Officer and each of the three other persons
who were serving as executive officers of the Company at the end of 1997
and received cash compensation exceeding $100,000 during 1997.



                              Annual Compensation

                                                Long Term
                                                Compensa-
                                                tion
                                                Awards
Name and                                        Stock
Principal                                       Options     All Other
Position   Year Salary(1)   Bonus(8)   Other(2) (Shares)    Compensation(9)


Roy F.
Mitte,
Chairman,
President  1997 $252,253 $751,500       -0-     -0-         -0-
and Chief  1996 $286,643  -0-           -0-     -0-         $2,446,397 (3)
Executive  1995 $286,643  -0-           -0-     -0-         $  713,513 (4)
Officer

James M.
Grace,
Vice
President  1997 $195,000  $40,000      -0-(5)   -0-       $19,024
and        1996  195,000  $15,000       -0-     -0-         -0-
Treasurer  1995  195,000  $10,000       -0-     -0-         -0-

Eugene E.
Payne,
Vice       1997 $195,000  $40,000       -0-(6)  -0-       $17,925
President  1996 $195,000  $15,000       -0-     -0-         -0-
and        1995 $195,000  $10,000       -0-     -0-         -0-
Secretary

Jeffrey
H. Demgen  1997 $117,884  $30,000       -0-     -0-         -0-
Vice       1996 $102,500  $ 7,500       -0-     -0-         -0-
Presi-
dent(7)

(1)  The executive officers of the Company have also been executive
officers of the Company's insurance subsidiaries and FIC and FIC's
insurance subsidiary, Family Life.  FIC and/or Family Life reimbursed the
Company (or, in the case of Mr. Mitte, authorized payment of) the
following amounts as FIC's or Family Life's share of these executive
officers' cash compensation and bonus for 1995, 1996 and 1997: (i) Mr.
Mitte: $216,857, $216,857, and $999,746 respectively, which amounts are
not included in the above table; (ii) Mr. Grace: $88,293, $83,987 and
$68,150 respectively; (iii) Dr. Payne: $79,875, $83,987 and $68,150
respectively; and (iv) Mr. Demgen $46,125 and $66,548(1996 and 1997
only).

(2)  Does not include the value of perquisites and other personal
benefits because the aggregate amount of any such compensation does not
exceed the lesser of $50,000 or 10 percent of the total amount of annual
salary and bonus for any named individual.

(3)  During 1996, the Company paid Mr. Mitte: (i) $1,862,000 for the
cancellation in 1996 of options to purchase 121,500 shares of the
Company's common stock, plus interest at the rate of 8% per year on such
amount for a one year period (for a total of $2,011,737); (ii) $120,700
for the federal income tax reimbursement relating to the cancellation in
1995 of options to purchase 50,000 shares of the Company's common stock;
and (iii) $313,960 for the federal income tax reimbursement relating to
the 1996 options cancellation described above in this footnote.  Each of
these payments was made pursuant to the contract referred to in footnote
4.

(4)  In 1989, the Board of Directors granted Mr. Mitte  options to
purchase 600,000 shares (as adjusted for the three-for-one stock split
effective February 15, 1990) of the Common Stock of the Company in equal
annual installments of 150,000 shares each. Each installment was subject
to the approval of the Board of Directors and is exercisable for a period
of ten years from the date the options become exercisable at a price of
$1.00 per share (as adjusted).  The Board of Directors voted to award
installments of 150,000 shares in each of 1989, 1990, 1991 and 1992.  In
October 1992, Mr. Mitte surrendered to the Company for cancellation
options to purchase 120,000 shares.  The Company and Mr. Mitte entered
into a contract in 1993 providing for the cancellation in 1993 of 240,000
options for an aggregate amount of $3,237,120 and the cancellation in
subsequent years of the remaining options for an aggregate amount of
$3,610,240.  In addition, the Company agreed to pay Mr. Mitte the amount
necessary to ensure that Mr. Mitte will receive the same amount, after
federal income tax, that he would have received if the options had been
cancelled in 1992.  During 1995, Mr. Mitte was paid $836,582 for the
cancellation in 1995 of options to purchase 50,000 shares of ILCO's
Common Stock, $156,323 for the federal income tax reimbursement relating
to the cancellation in 1994 of options to purchase 68,500 shares and
$127,608 as the final payment relating to the cancellation in 1993 of
options to purchase 240,000 shares.  These option cancellation payments
were made pursuant to the contract referred to above.  FIC's Compensation
Committee made a recommendation to FIC's Board of Directors, which it
adopted, that, in lieu of paying Mr. Mitte a bonus as it has in the past,
FIC paid $407,000 of these option cancellation payments to Mr. Mitte,
with the balance of $713,513 being paid by ILCO.

(5)  Mr. Grace exercised stock options in 1997 to purchase 12,000  shares
of the Company's Common Stock under the Non-Qualified Option Plan and
30,000 shares of the Company s Common Stock under the Incentive Stock
Option Plan.  See "Aggregated Option Exercises in 1997" below.

(6)  Dr. Payne exercised stock options in 1997 to purchase 6,000   shares
of the Company's Common Stock under the Non-Qualified Stock Option Plan
and 20,000 shares of the Company s Common Stock under the Incentive stock
Option Plan.  See "Aggregated Option Exercises in 1997" below.

(7) Mr. Demgen became an executive officer of the Company in August,
1996.

(8) The data in this column represents the annual bonus paid  in 1997.
The bonuses for Mr. Grace, Dr. Payne and Mr. Demgen represent amounts
paid in 1997, but include the bonuses awarded with respect to the years
1996 and 1997. Dr. Payne elected to defer this amount into the Company's
Non-Qualified Deferred Compensation Plan.  The Plan was established in
1997 to permit Mr. Grace and Dr. Payne  to defer a portion of their
compensation. Under the provisions of the Plan, contributions are
invested on a money purchase basis and plan benefits are based on the
value of the account at retirement or other distribution.  In accordance
with applicable tax law requirements, amounts allocated to the Plan are
subject to the claims of general creditors of the Company. See also, Note
9.

(9)  The data in this column represents the amount paid by the Company in
1997 to Mr. Grace and Dr. Payne to supplement the benefits under the
Company's Pension Plan. The supplement relates to each of the past
service years for Mr. Grace and Dr. Payne which were affected by the
limitation on  compensation which the Pension Plan may take into account
for benefit accrual purposes.  Under federal pension rules, an employee's
benefits under a qualified pension plan, such as the ILCO Pension Plan,
are limited to certain maximum amounts.  The amount of the payments made
in 1997 was determined by comparing the accrued benefit for the listed
individuals under the ILCO Pension Plan through December 31, 1996 to the
accrued benefit which the individual would have had under the Plan's
benefit formula  without application of the limitations applicable to tax
qualified retirement plans.  The value of the difference, representing an
amount payable for life commencing at normal retirement age, was then
commuted to its present value, which amount is included in this column.
Mr. Grace and Dr. Payne elected to defer their respective amounts into
the Company's Non-Qualified Deferred Compensation Plan.  The Company
intends to make a similar payment with respect to benefit accruals for
the year 1997 only; however, there is no obligation for it to do so. See
Note 8.


Option Grants in 1997

No options were granted to any executive officers of the Company during
the year 1997.

Aggregated Option Exercises in 1997

The following table sets forth information concerning each exercise of
stock options during 1997 by each of the individuals who were executive
officers of the Company as of December 31, 1997.


                          Shares
                          Acquired              Value
Name                      On Exercise (#)       Realized ($)


James M. Grace              42,000               $437,340

Eugene E. Payne             26,000               $278,920


Aggregated Stock Option Values

The following table sets forth information with respect to the
unexercised options held by the executive officers of the Company.


                                                       Value of
                         Number of                   Unexercised
                   Unexercised Options               In-the-Money
                         Held at                      Options at
                    December 31, 1997             December 31, 19971
Name            Exercisable Unexercisable       Exercisable Unexercisable


James M. Grace   12,000         12,000            $200,040   $200,040

Eugene E. Payne   6,000          6,000            $100,020   $100,020


(1) Based on the closing price of the Company's Common Stock on NASDAQ on
December 31, 1997 ($20.00).

Members of Compensation Committee

W. Lewis Gilcrease, Donald Shuman and Richard A. Kosson are the members
of the Company's Compensation Committee, which makes recommendations to
the Board of Directors with respect to the Chief Executive Officer's
compensation.


Compensation Committee Interlocks and Insider Participation

Roy F. Mitte determines the compensation of all executive officers of the
Company, other than the Chief Executive Officer.  Mr. Mitte is the
Chairman of the Board, President and Chief Executive Officer of the
Company and FIC.  He also determines the compensation of all executive
officers of FIC, other than the Chief Executive Officer.

Pension Plan Table

The following table sets forth estimated annual pension benefits payable
upon retirement at age of 65 under the Company's noncontributory defined
benefit plan ("Pension Plan") to an employee in the final pay and years
of service classifications indicated, assuming a straight life annuity
form of benefit.  The amounts shown in the table do not reflect the
reduction related to Social Security benefits referred to below.


                                       Years of Service

                                                30 or
Remuneration       15        20         25      more

$125,000         $29,437   $ 39,250   $ 49,062   $ 58,875
 150,000          35,325     47,100     58,875     70,650
 160,000          37,680     50,240     62,800     75,360
 175,000          41,212     54,950     68,687     82,425
 200,000          47,100     62,800     78,500     94,200

The normal retirement benefit provided under the Pension Plan is equal to
1.57% of final average eligible earnings less 0.65% of the participant's
Social Security covered compensation multiplied by the number of years of
credited service (up to 30 years).  The compensation used in determining
benefits under the Pension Plan is the highest average earnings received
in any five consecutive full-calendar years during the last ten full-
calendar years before the participant's retirement date.  The maximum
amount of annual salary and bonus that can be used in determining
benefits under the Pension Plan is $200,000 for any year prior to 1994
and is $150,000 for 1994, 1995, and 1996 and is $160,000 for 1997 and
each subsequent year.

The annual eligible earnings, for 1997 only, covered by the Pension Plan
(salary and bonus up to $160,000) with respect to the individuals
reported in the Summary Compensation Table were as follows, with their
respective years of credited service under the Pension Plan at December
31, 1997 being shown in parentheses:  Mr. Mitte, $160,000 (10 years), Mr.
Grace, $160,000 (10 years), Dr. Payne, $160,000 (9 years),  and Mr.
Demgen (5 years).

Compensation of Directors

Directors who are not officers or employees of the Company are paid a
$5,000 annual fee, and are compensated $1,000 for each regular or special
meeting of the Board of Directors which they attend in person.  In the
case of telephonic meetings of the Board, non-employee directors who
participate in such telephonic meetings are compensated $500 for such
meeting.  Directors who participate via telephone in a regular or special
meeting which is held by other than conference telephone are not entitled
to a fee for such a meeting.

Non-employee directors serving on committees of the Board are compensated
in the amount of $500 for each committee meeting they attend whether such
participation is in person or by telephone, provided that the committee
meeting is held on a day other than that on which the Board meets.

Employment Agreements and Change In Control Arrangements

The terms and conditions of employment agreements that the Company would
enter into upon the occurrence of certain events that result in the
agreements taking effect were approved by the Board of Directors with
respect to Messrs. Grace and Payne  in 1991   Each agreement  would
include two independent provisions with respect to the effective date and
the term of each agreement.  First, the term of the agreement would begin
on the earlier of (i) the date of retirement (early, normal or deferred)
of Roy F. Mitte from his position as Chairman, President and Chief
Executive Officer of the Company or (ii) the date of death or disability
of Mr. Mitte, and would terminate on the last day of the twelfth month
next following the commencement date of the term of the agreement, unless
extended upon mutually acceptable terms.

Independently, the term of the agreement would commence upon the date
that any person who is not currently a control person with respect to the
Company acquires, or enters into an agreement to acquire, control of the
Company, directly or indirectly, and would end on the last day of the
twelfth month next following the date on which the employee receives
notice of the termination of his employment with the Company or the life
insurance subsidiaries of the Company.

During the term of the agreement, the employee would be entitled to
perform all of the duties of the position or positions held by the
employee with the Company and all subsidiaries of the Company on the date
immediately preceding the commencement date of the agreement.

During the term of the agreement, the employee would be entitled to an
annual rate of compensation which is not less than the annual rate of
compensation in effect as of the date immediately preceding the
commencement date of the agreement.  During the term of the agreement,
the employee would be entitled to participate in and benefit from all
employee benefit plans and other fringe benefits on the same basis as
such plans and benefits are made available to other executive personnel
of the Company.

The agreement may be terminated by the Company only in the event that the
employee is guilty of theft of property of the Company or commits a
wrongful act which has a material adverse effect upon the business of the
Company and with respect to which the employee would not be entitled to
indemnification under the provisions of the Bylaws of the Company in
effect as of the commencement date of the agreement.  The employee may
terminate the agreement upon thirty days advance written notice to the
Company.

Item 12.  Security Ownership of Certain Beneficial Owners and
          Management

The following table presents information as of  March 16, 1998 as to all
persons who, to the knowledge of the Company, were beneficial owners of
five (5%) percent or more of the Common Stock of the Company.


                                    Amount and
                                    Nature of         Percent of
Name and Address               Beneficial Ownership     Class

Financial Industries Corp.
701 Brazos, Suite 1400
Austin,  TX   78701.............  3,668,501 (1)       60.68% (6)

Roy F. Mitte
701 Brazos, Suite 1400
Austin,  TX   78701.............. 3,684,361  (2,3)    60.94% (6)

Investors Life Insurance Company
  of North America
701 Brazos, Suite 1400
Austin, TX  78701................   334,960  (4)      7.71% (6)

Investors Life Insurance
  Company of Indiana
701 Brazos, Suite 1400
Austin, TX 78701.................   281,560  (5)      6.48% (6)


Fidelity Management & Research
Company
82 Devonshire Street
Boston, MA 02109................... 432,700 (7)        9.96% (6)


1         Includes 1,966,346 shares of the Company's stock presently
          owned and an option to purchase up to 1,702,155 shares of the
          Company's authorized but unissued Common Stock which is the
          balance of the option granted to Financial Industries
          Corporation ("FIC") by the Company in December, 1985.  This
          option may be exercised by FIC at any time at an exercise price
          equal to the average bid prices of the Company's Common Stock
          over the six-month period immediately preceding such exercise.

2         As of March 16, 1998, Mr. Mitte, jointly with his wife Joann,
          currently owns 1,493,216 common shares of Financial Industries
          Corporation ("FIC"). Mr. Mitte and his wife also control the
          Roy F. and Joanne Cole Mitte Foundation, a Texas non-profit
          corporation (the "Foundation"), which owns 373,304 common
          shares of FIC stock as a result of a donation made by Mr. Mitte
          and his wife from their personal holdings. The holdings of the
          Foundation combined with Mr. and Mrs. Mitte's remaining
          personal holdings in FIC stock constitutes 34.39 percent of the
          outstanding common stock of that company. Mr. Mitte holds the
          position of Chairman, President and Chief Executive Officer of
          FIC.

          Since FIC holds a controlling interest in the Company, Mr.
          Mitte's personal holdings in the Company have been combined
          with the holdings of FIC in determining the amount and
          percentage of Mr. Mitte's beneficial ownership of the Company.

3         Includes  15,860 shares allocated to Mr. Mitte's account under
          the Employee Stock Ownership Plan.

4         Represents 281,560 shares owned by Investors-IN (formerly
          InterContinental Life Insurance Company and 53,400 shares owned
          directly by Investors-NA.  Investors-IN is a life insurance
          company subsidiary of Investors-NA.  All of these shares are
          treated as treasury shares.

5         All are directly owned by Investors-IN and are treated as
          treasury shares.

6         Assumes that outstanding stock options or warrants available to
          other persons have not been exercised.

7.        As reported to the Company on a Schedule 13(G) filed by FMR
          Corporation, the parent company of Fidelity Management &
          Research Company ("Fidelity").  According to the Schedule
          13(G), Fidelity acts as investment advisor to the Fidelity Low-
          Priced Stock Fund, a registered investment company, and the
          Fund is the owner of 432,700 shares of ILCO common stock, of
          which 418,300 shares were reported on a Schedule 13(G) filed on
          February 14, 1997 and 14,400 additional shares which were
          reported on a schedule 13(g)filed on February 14, 1998.



The following table contains information as of March 16, 1998 as to the
Common Stock of the Company beneficially owned by each director, nominee
and executive officer and by all executive officers and directors of the
Company as a group.  The information contained in the table has been
obtained by the Company from each director and executive officer except
for information known to the Company.  Except as indicated in the notes
to the table, each beneficial owner has sole voting power and sole
investment power as to the shares listed opposite his name.


                                    Amount and
                                    Nature of         Percent of
Name                            Beneficial Ownership    Class

Robert A. Bender                       854 (3)          *

Jeffrey H. Demgen                    4,067 (3)          *

Theodore A. Fleron                  15,689  (3,4)        *

W. Lewis Gilcrease                      -0-

James M. Grace (1)                  61,346 (2,3)       1.4%

Richard A. Kosson                      200               *

Roy F. Mitte (1)                 3,684,361 (3)       60.94%

Eugene E. Payne (1)                 32,286 (3)           *

H. Gene Pruner                          -0-

Donald Shuman                          450               *

Steven P. Schmitt                 14,347 (3,4)           *


All Executive
Officers and
Directors as a
group, all of
whom are listed
above                             3,813,600 (1,2,3,4) 62.83%

* Less than 1%

(1)       As an executive officer and/or director of FIC which as of
          March 16, 1998 beneficially owned 3,668,501 shares of the
          Company's Common Stock (including option rights to purchase
          1,702,155 shares of the Company).  In addition to the
          shareholdings of Mr. Mitte in FIC (see Note 2, above), Mr.
          Grace owns 5,600 shares of FIC Common Stock.

(2)       Includes 12,000 shares issuable upon exercise of options
          granted under the Non-Qualified Stock Option Plan during 1988
          to Mr. Grace at a price of $3.33 (as adjusted) per share, which
          are currently available for exercise.

(3)       Includes shares beneficially acquired through participation in
          the Company's ESOP, 401K and/or the Employee Stock Purchase
          Plan, which are group plans for eligible employees.

(4)       Includes 6,000 shares issuable upon exercise of options granted
          under the Non-Qualified Stock Option Plan during 1988 to each
          of Messrs. Fleron and Schmitt at a price of $3.33 (as adjusted)
          per share, which are currently exercisable.


Item 13.  Certain Relationships and Related Transactions
          with Management

a.        The obligations of the Company under the Senior Loan are
          guaranteed by FIC.  FIC presently owns 1,966,346 shares of the
          company's Common Stock, constituting 45.40% of such shares
          outstanding, and holds options to acquire an additional
          1,702,155 shares at the average bid price of such shares during
          the six-month period preceding the date of any such purchase.
          In the event that such options were to be fully exercised, the
          total number of the Company's shares owned by FIC would
          constitute 60.80% of the outstanding shares of the Company's
          Common Stock. As described under the heading  Senior Loan , the
          current Senior Loan of ILCO is scheduled to be fully repaid on
          October 1, 1998. Accordingly, unless ILCO s Senior Loan is
          extended, or ILCO otherwise incurs indebtedness which is
          guaranteed by FIC, FIC s rights under the 1986 option agreement
          would expire on October 1, 1998.

b.        In connection with the December, 1997 sale of Bridgepoint
          Square Offices by Investors-NA and Family Life Insurance
          Company, FIC Realty received a commission in the amount of
          $156,000, of which $122,538 was paid by Investors-NA and
          $33,462 by Family Life.

c.        As part of the financing arrangement for the acquisition of
          Family Life Insurance Company, Family Life Corporation ("FLC"),
          a subsidiary of FIC, entered into a Senior Loan agreement under
          which $50 million was provided by a group of banks.  The
          balance of the financing consisted of a $30 million
          subordinated note issued by FLC to Merrill Lynch Insurance
          Group, Ins. ("Merrill Lynch") and $14 million borrowed by
          another subsidiary of FIC from an affiliate of Merrill Lynch
          and evidenced by a senior subordinated note in the principal
          amount of $12 million and a junior subordinated note in the
          principal amount of $2 million and $25 million lent by two
          insurance company subsidiaries of ILCO. The latter amount was
          represented by a $22.5 million loan from Investors-NA to FLC
          and a $2.5 million loan provided directly to FIC by Investors-
          CA.  In addition to the interest provided under those loans,
          Investors-NA and Investors-CA were granted by FIC non-
          transferable options to purchase, in the amounts proportionate
          to their respective loans, up to a total of 9.9 percent of
          shares of FIC's common stock at a price of $10.50 per share
          ($2.10 per share as adjusted for the five-for-one stock split
          in November, 1996), equivalent to the then current market
          price, subject to adjustment to prevent dilution.  The original
          provisions of the options provided for their expiration on June
          12, 1998 if not previously exercised. In connection with the
          1996 amendments to the subordinated notes, as described below,
          the expiration date of the options were extended to September
          12, 2006.

          On July 30, 1993, the subordinated indebtedness owed to Merrill
          Lynch and its affiliate was prepaid.  The Company paid $38
          million plus accrued interest to retire the indebtedness, which
          had a principal balance of approximately $50 million on July
          30, 1993. The primary source of the funds used to prepay the
          subordinated debt was new subordinated loans totaling $34.5
          million that FLC and another subsidiary of FIC obtained from
          Investors-NA.  The principal amount of the new subordinated
          debt is payable in four equal annual installments in 2000,
          2001, 2002 and 2003 and bears interest at an annual rate of 9%.
          The other terms of the new debt are substantially the same as
          those of the $22.5 million subordinated loans that Investors-NA
          had previously made to FLC and that continue to be outstanding.

          In June, 1996, the provisions of the notes from Investors-NA to
          FIC, Family Life Corporation ( FLC ) and Family Life Insurance
          Investment Company ( FLIIC ) were modified as follows: (a) the
          $22.5 million note was amended to provide for twenty quarterly
          principal payments, in the amount of $1,125,000 each, to
          commence on December 12, 1996; the final quarterly principal
          payment is due on September 12, 2001; the interest rate on the
          note remains at 11%, (b) the $30 million note was amended to
          provide for forty quarterly principal payments, in the amount
          of $163,540 each for the period December 12, 1996 to September
          12, 2001; beginning with the principal payment due on December
          12, 2001, the amount of the principal payment increases to
          $1,336,458;  the final quarterly principal payment is due on
          September 12, 2006; the interest rate on the note remains at
          9%, (c) the $4.5 million note was amended to provide for forty
          quarterly principal payments, in the amount of $24,531 each for
          the period December 12, 1996 to September 12, 2001; beginning
          with the principal payment due on December 12, 2001, the amount
          of the principal payment increases to $200,469;  the final
          quarterly principal payment is due on September 12, 2006; the
          interest rate on the note remains at 9%, (d) the $2.5 million
          note was amended to provide that the principal balance of the
          note is to be repaid in twenty quarterly installments of
          $125,000 each, commencing December 12, 1996 with the final
          payment due on September 12, 2001; the rate of interest remains
          at 12%, (e) the Master PIK note, which was issued to provide
          for the payment in kind of interest due under the terms of the
          $2.5 million note prior to June 12, 1996, was amended to
          provide that the principal balance of the note ($1,977,119) is
          to be paid in twenty quarterly principal payments, in the
          amount of $98,855.95 each, to commence December 12, 1996 with
          the final payment due on September 12, 2001; the interest rate
          on the note remains at 12%.

d.        The Company reimbursed FIC for rental expenses and certain
          other operating expenses incurred during 1997 on behalf of the
          Company. The amount of such reimbursement was approximately
          $822,000.

e.        Pursuant to a data processing agreement with a major service
          company, the data processing needs of ILCO's and FIC's
          insurance subsidiaries were provided at a central location
          until November 30, 1994.  Commencing December 1, 1994, all of
          those data processing needs are provided to ILCO's and FIC's
          Austin, Texas and Seattle, Washington facilities by FIC
          Computer Services, Inc. ("FIC Computer"), a new subsidiary of
          FIC.  Each of FIC's and ILCO's insurance subsidiaries has
          entered into a data processing agreement with FIC Computer
          whereby FIC Computer provides data processing services to each
          subsidiary for fees equal to such subsidiary's proportionate
          share of FIC Computer's actual costs of providing those
          services to all of the subsidiaries.  The Company's insurance
          subsidiaries paid $3,010,110 and Family Life paid $824,425 to
          FIC Computer for data processing services provided during the
          year ended December 31, 1997.

f.        In 1995, Investors-NA entered into a reinsurance agreement with
          Family Life pertaining to universal life insurance written by
          Family Life.  The reinsurance agreement is on a co-insurance
          basis and applies to all covered business with effective dates
          on and after January 1, 1995.  The agreement applies to only
          that portion of the face amount of the policy which is less
          than $200,000; face amounts of $200,000 or more are reinsured
          by Family Life with a third party reinsurer.

g.        In 1996, Investors-NA entered into a reinsurance agreement with
          Family Life, pertaining to annuity contracts written by Family
          Life. The agreement applies to contracts written on or after
          January 1, 1996.

h.        Roy F. Mitte serves as Chairman, President and Chief Executive
          Officer of both FIC and ILCO.  James M. Grace serves as Vice
          President, Treasurer and Director of both companies and
          Secretary of FIC. Dr. Payne serves as Vice President, Secretary
          and Director of both companies. Messrs. Demgen and Fleron serve
          as Vice Presidents and Directors of both companies; and Mr.
          Crowe served as a Director of ILCO until October, 1997; he
          serves as a Director of FIC and, until his retirement in
          January, 1997, served as a Vice President of both companies.
          Mr. Roy Mitte holds beneficial ownership of 34.39% of the
          outstanding shares of FIC (see "Security Ownership of Certain
          Beneficial Owners and Management").

i.        Mr. Crowe retired from active service with the Company in
          January, 1997 and served on the ILCO Board until October, 1997;
          he continues to serve on the Board of Directors of FIC.
          Following Mr. Crowe's retirement, the Company entered into a
          consulting agreement with him.  Under the terms of the
          agreement, Mr. Crowe is to be available for periodic
          consultation on actuarial matters related to the operations of
          the life insurance companies. The agreement provide of a
          payment of $25,000 per year for a period of five-years.


                                     Part IV

Item 14.  Exhibits, Financial Statements, Schedules, and
                Reports on Form 8-K

(a)       The following documents have been filed as part of this Report.

1.        Financial Statements as identified in Item 8 above.

2.        Financial Statement Schedules Required to be filed
          by Item 8.

          a.    Schedule I-Summary of Investments
                other than Investments in Related
                Parties.
          b.    Schedule II-Amounts Receivable from
                Related Parties, Underwriters,
                Promoters and Employees other than
                Related Parties.
          c.    Schedule III-Condensed Financial
                Statements of Registrant.
          d.    Schedule VI-Reinsurance Ceded and
                Assumed.

3.        Exhibits filed with this report or incorporated
          herein by reference are as listed in the Index to
          Exhibits on page E-1.

          (b)   Reports on Form 8-K:

                No reports on Form 8-K were filed
                during the last quarter of the fiscal
                year ended December 31, 1997.

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                        InterContinental Life Corporation
                                  (Registrant)

By:       /s/ Roy F. Mitte           By:/s/ James M. Grace
          Roy F. Mitte, Chairman of     James M. Grace, Treasurer,
          the Board, President and         Principal Accounting
          Chief Executive Officer       and Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March    , 1998.

/s/ Roy F. Mitte
Roy F. Mitte, Director

/s/ James M. Grace
James M. Grace, Director

/s/ Jeffrey H. Demgen
Jeffrey H. Demgen, Director

/s/ Eugene E. Payne
Eugene E. Payne, Director

/s/ Robert A. Bender
Robert A. Bender, Director

/s/ Theodore A. Fleron
Theodore A. Fleron, Director

/s/ H. Gene Pruner
H. Gene Pruner, Director

/s/ Steven P. Schmitt
Steven P. Schmitt, Director

/s/ W. Lewis Gilcrease
W. Lewis Gilcrease, Director

/s/ Richard A. Kosson
Richard A. Kosson, Director

/s/ Donald Shuman
Donald Shuman, Director


               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                        FORM 10-K--ITEM 14 (a)(1) and (2)
                          LIST OF FINANCIAL STATEMENTS
                                TABLE OF CONTENTS



The following consolidated financial statements of InterContinental Life
Corporation and Subsidiaries are included in Item 8:

Report of Independent Accountants.............................F-2

Consolidated Balance Sheets, December 31, 1997 and 1996.......F-3

Consolidated Statements of Income, for the years ended
 December 31, 1997, 1996 and 1995.............................F-5

Consolidated Statements of Changes in Shareholders' Equity,
 for the years ended December 31, 1997, 1996 and 1995.........F-6

Consolidated Statements of Cash Flows, for the years ended
 December 31, 1997, 1996 and 1995.............................F-9

Notes to Consolidated Financial
 Statements...................................................F-12

The following consolidated financial statement schedules of
InterContinental Life Corporation and Subsidiaries are included:

Schedule I   - Summary of Investments Other Than
Investments in Related  Parties...............................F-43

Schedule II - Condensed Financial Statements of
Registrant................................................... F-44

Schedule IV  - Reinsurance....................................F-48


All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable, and
therefore have been omitted.


                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
InterContinental Life Corporation

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page F-1 present fairly, in all
material respects, the financial position of InterContinental Life
Corporation and its subsidiaries (the Company) at December 31, 1997 and
1996, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.  These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements
based on our audits.  We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for the opinion expressed
above.



Price Waterhouse LLP
Dallas,  Texas
March 27, 1998


              INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                            (in thousands of dollars)
                                                December 31,
       ASSETS                               1997                1996

Investments:
 Fixed maturities, at
   amortized cost (market value
   approximates $3,332 and $8,374)       $   3,412           $   8,165
 Fixed maturities available for sale,
   at market value (amortized cost
   $436,836 and $451,550)                  454,462             453,896
 Equity securities, at market value
  (cost approximates $369 and $373)          4,902               2,304
 Policy loans                               53,499              53,030
 Mortgage loans                             10,862              13,494
 Invested real estate and other invested
 assets                                      1,300              38,696
 Short-term investments                    164,622              91,556
     Total investments                     693,059             661,141

Cash and cash equivalents                    9,041               3,313

Notes receivable from affiliates            53,792              59,940

Accrued investment income                    7,781               7,807

Agent advances and other receivables        11,362              21,725

Reinsurance receivables                     20,433              12,123

Property and equipment, net                  1,902               1,785

Deferred policy acquisition costs           28,621              26,938

Present value of future profits of
 acquired businesses                        47,286              45,240

Deferred financing costs                       111                 636

Other assets                                 7,929               8,965

Separate account assets                    440,336             414,329

     Total Assets                       $1,321,653          $1,263,942

                   The accompanying notes are an integral part of the
                       consolidated financial statements.


               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS, Continued
                            (in thousands of dollars)
                                                December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY             1997            1996

Liabilities:
Policy liabilities and contractholder
 deposit funds:
Future policy benefits                   $        131,720        $  119,744
Contractholder deposit funds                      525,135           538,505
Unearned premiums                                   7,701             9,069
Other policy claims and benefits payable            7,078             5,988
                                                  671,634           673,306
Other policyholders' funds                        3,093               2,720
Senior loans                                      10,964             24,944
Deferred federal income taxes                     31,811             23,692
Other liabilities                                 20,299             13,835
Separate account liabilities                      438,090           412,084
  Total Liabilities                             1,175,891          1,150,581

Commitments and Contingencies
(Note 13)
Redeemable preferred stock:
Class A Preferred, $1 par value,
 5,000,000 shares authorized, issued              5,000          5,000
Class B Preferred, $1 par value,
 15,000,000 shares authorized, issued            15,000         15,000
                                                 20,000         20,000
Redeemable Preferred Stock held
 in treasury                                    (20,000)       (20,000)
                                                   -0-            -0-
Shareholders' Equity:

Common stock, $.22 par value,
 10,000,000 shares authorized;
 5,343,739 and 5,223,739 shares issued,
 4,331,335 and 4,232,829 shares out-
 standing in 1997 and 1996, respectively          1,176          1,150
Additional paid-in capital                        4,253          3,752
Net unrealized appreciation of
 equity securities                                2,946          1,255
Net unrealized gain on investments
 in fixed maturities available for sale          11,457          1,525
Retained earnings                               129,237        108,697
                                                149,069        116,379
Common treasury stock, at cost,
 1,012,404 and 990,910 shares in 1997
 and 1996, respectively                          (3,307)         (3,018)
Total Shareholders' Equity                      145,762         113,361
Total Liabilities and Shareholders'
 Equity                                     $ 1,321,653     $ 1,263,942

              The accompanying notes are an integral part of the
                    consolidated financial statements.

             INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF INCOME
                         (in thousands of dollars,
                         except for per share data)
                                       Year Ended December 31,
                                     1997      1996      1995

Revenues:
Premiums                           $ 11,031     $ 9,980  $ 11,694
Net investment income                57,740      59,836    64,781
Earned insurance charges             40,853      42,238    42,324
Gain on sale of real estate          14,630      23,520     -0-
Other                                 3,429       2,670     3,591
                                    127,683     138,244   122,390
Benefits and expenses:
Policyholder benefits and expenses   37,962      40,091    42,639
Interest expense on contractholder
 deposit funds                       30,533      32,068    32,375
Amortization of present value of
 future profits of acquired
 businesses                           6,311       3,366     6,211
Amortization of deferred policy
 acquisition costs                    2,818       2,574     3,929
Operating expenses                   16,798      15,884    15,016
Interest expense                      1,659       2,820     5,737
                                     96,081      96,801   105,907

Income from operations               31,602      41,443    16,483

Provision for federal income taxes:
 Current                              9,005      10,227       945
 Deferred                             2,057       4,278     4,824
                                     11,062      14,505     5,769

Net income                        $  20,540    $ 26,938  $ 10,714

Net income per share (Note 14):
Basic:
 Weighted average common stock
  outstanding                         4,328     4,233     4,175

 Basic earnings per share          $   4.75    $  6.36  $  2.57

Diluted:
 Common stock and common
  stock equivalents                   4,369     4,441     4,342

 Diluted earnings per share        $   4.70   $  6.07   $  2.47


          The accompanying notes are an integral part of the
                     consolidated financial statements.

             INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                               (in thousands)

                                                       Additional
                                   Common Stock          Paid-in
                               Shares       Amount       Capital
Balance at December 31,
  1994                           5,107      $ 1,124        $ 2,854
 Net income
 Change in net unrealized
  appreciation of equity
  securities
 Change in net unrealized
  loss on investments
  in fixed maturities
  available for sale
 Options exercised                   59          13            667

Balance at December 31,
  1995                             5,166       1,137           3,521
 Net income
 Change in net unrealized
  appreciation of equity
  securities
 Change in net unrealized
  loss on investments
  in fixed maturities
  available for sale
 Options exercised                   58           13             231

Balance at December 31,
  1996                             5,224        1,150          3,752
 Net income
 Change in net unrealized
  appreciation of equity
  securities
 Change in net unrealized
  gain on investments
  in fixed maturities
  available for sale
 Treasury stock purchased
 Options exercised                  120           26               501

Balance at December 31,
  1997                             5,344    $  1,176          $  4,253



            The accompanying notes are an integral part of these
                     consolidated financial statements.

             INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                         (in thousands of dollars)
                                           Net
                                        Unrealized
                                        Gain (Loss)
                                        on Invest-
                              Net        ments in
                           Unrealized     Fixed
                          Appreciation  Maturities
                           of Equity     Available      Retained
Balance at December 31,   Securities     For Sale       Earnings
  1994                      $  568         $(20,266)    $ 71,045
 Net income                                               10,714
 Change in net unrealized
  appreciation of equity
  securities                   180
 Change in net unrealized
  loss on investments
  in fixed maturities
  available for sale                           33,204
  Options exercised

Balance at December 31,
  1995                         748             12,938    81,759
 Net income                                              26,938
 Change in net unrealized
  appreciation of equity
  securities                     507
 Change in net unrealized
  gain on investments
  in fixed maturities
  available for sale                         (11,413)
 Options exercised

Balance at December 31,
  1996                          1,255           1,525    108,697
 Net income                                               20,540
 Change in net unrealized
  appreciation of equity
  securities                    1,691
 Change in net unrealized
  gain on investments
  in fixed maturities
  available for sale                           9,932
 Treasury stock purchased
 Options exercised

Balance at December 31,
  1997                        $  2,946      $  11,457 $ 129,237

          The accompanying notes are an integral part of the
                     consolidated financial statements.



             INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                         (in thousands of dollars)

                               Common        Total
                              Treasury     Shareholders'
                                Stock         Equity
Balance at December 31,
  1994                        $(3,018)       $ 52,307
Net income                                     10,714
 Change in net unrealized
  appreciation of equity
  securities                                      180
 Change in net unrealized
  loss on investments
  in fixed maturities
  available for sale                            33,204
 Options exercised                                 680

Balance at December 31,
  1995                         (3,018)           97,085
 Net income                                      26,938
 Change in net unrealized
  appreciation of equity
  securities                                        507
 Change in net unrealized
  loss on investments
  in fixed maturities
  available for sale                            (11,413)
 Options exercised                                  244

Balance at December 31,
  1996                         (3,018)           113,361
 Net income                                       20,540
 Change in net unrealized
  appreciation of equity
  securities                                       1,691
 Change in net unrealized
  gain on investments
  in fixed maturities
  available for sale                               9,932
 Treasury stock purchased        (289)              (289)
 Options exercised                                   527

Balance at December 31,
  1997                        $(3,307)          $145,762


            The accompanying notes are an integral part of the
                     consolidated financial statements.


              INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (in thousands of dollars)

                                       Year Ended December 31,

CASH FLOWS FROM OPERATING             1997       1996      1995
 ACTIVITIES

Net income                         $ 20,540    $ 26,938   $10,714

 Adjustments to reconcile net
 income to net cash provided by
 (used in) operating activities:
Amortization of present value of
 future profits of acquired
 businesses                           6,311       3,366     6,211
Amortization of deferred policy
 acquisition costs                    2,819       2,572     5,393
Depreciation                          2,398       1,356     2,610
Net gain on sales of investments    (14,805)    (23,394)     (418)
Financing costs amortized               525         961       865
Amortization of deferred gain on
 sale of real estate                   (110)       (110)     (110)

Changes in assets and liabilities:

Decrease in accrued investment
 income                                 362         383     1,759
Decrease (increase) in agent
 advances and  other receivables      4,170    (2,783)      4,656
Policy acquisition costs deferred    (4,502)   (4,584)     (3,573)
Decrease in policy liabilities
 and contractholder deposit funds   (17,585)   (16,374)   (27,753)
(Decrease) increase in other policy
 holders' funds                        (258)        20       (349)
Increase (decrease) in other
 liabilities                          5,172    (13,270)       911
Increase (decrease) in deferred
 federal income taxes                 5,302     (1,770)     4,696
Decrease (increase) in other assets   1,036     (2,106)     7,527
Other, net                           (7,416)     5,331     (1,388)
Net cash provided by (used in)
 operating activities                 3,959    (23,464)    10,287

            The accompanying notes are an integral part of the
                     consolidated financial statements.

             INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (in thousands of dollars)


                                       Year Ended December 31,

CASH FLOWS FROM INVESTING             1997      1996      1995
ACTIVITIES


Purchase of insurance subsidiary    (11,688)      -0-    (17,492)
Investments purchased               (24,276)   (55,395)  (38,781)
Proceeds from sales and maturities
 of investments                     117,025    112,791    50,181
Net change in short-term
 investments                        (71,415)    (5,562)    8,847
Purchases & retirements of
 equipment                             (283)     1,319    (4,403)
Decrease (increase)in notes
 receivable from affiliates            6,148      1,284     (465)
Net cash provided by (used in)
 investing activities                 15,511     54,437   (2,113)


CASH FLOWS FROM FINANCING
ACTIVITIES

Purchase of treasury stock             (289)      -0-       -0-
Issuance of common stock                527       244       -0-
Issuance of senior loan                 -0-       -0-    15,000
Repayment of debt                   (13,980)   (34,441) (22,200)
Net cash used in financing
 activities                         (13,742)   (34,197)  (7,200)

Net increase (decrease) in cash
 and cash equivalents                 5,728     (3,224)     974

Cash and cash equivalents,
 beginning of year                    3,313      6,537    5,563

Cash and cash equivalents,
 end of year                        $ 9,041   $  3,313 $  6,537


            The accompanying notes are an integral part of the
                     consolidated financial statements.

             INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (in thousands of dollars)


Supplemental Cash Flow Disclosures:
                                      Year Ended December 31,
                                  1997         1996         1995

Income taxes paid                 $2,200       $ 13,567     $ 560

Interest paid                     $1,925        $ 3,377   $ 5,905


Supplemental Schedule of Non-Cash Investing Activities:

The Company purchased the outstanding capital stock of life insurers
in the third quarter of 1997 and the first quarter of 1995 for  cash
purchase prices of $11.8 million and $17.1 million net of post
closing adjustments.  The consolidated statements of cash flows
reflect the impact of these acquisitions.  These purchases resulted
in the Company receiving tangible assets and assuming liabilities as
follows:

                            1997             1995

     Assets               $32,420           $99,642
     Liabilities          $20,653           $90,816


            The accompanying notes are an integral part of the
                     consolidated financial statements.

             INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

Organization

InterContinental Life Corporation (ILCO or the "Company") is
principally engaged, through its subsidiaries, in administering
existing portfolios of individual life insurance, credit life and
credit disability insurance policies and annuity products.  The
Company's insurance subsidiaries are also engaged in the business of
marketing and underwriting individual life insurance and annuity
products in 49 states and the District of Columbia.  Such products
are marketed through independent, non-exclusive general agents.

Principles of Consolidation

The consolidated financial statements include the accounts of
InterContinental Life Corporation and its subsidiaries.  All
significant intercompany accounts and transactions have been
eliminated.

Basis of Presentation

The financial statements have been prepared in conformity with
generally accepted accounting principles which differ from statutory
accounting principles required by regulatory authorities for the
Company's insurance subsidiaries.  Significant accounting policies
followed by the Company are:

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period.  Actual results
will differ from those estimates.

Investments

The Company's general investment philosophy is to hold fixed
maturity securities until maturity.  However, fixed maturities may
be sold prior to the maturity dates in response to changing market
conditions, duration of liabilities, liquidity factors, interest
rate movements and other investment factors.  Accordingly, most
fixed maturity investments are classified as available for sale and
are carried at market value.  All other fixed maturities are carried
at the lower of amortized cost or net realizable value as management
has the positive intent and the Company has the ability to hold such
investments to maturity.  Unrealized gains and losses on securities
available for sale are not recognized in earnings but are reported

             INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

as a separate component of equity, net of the income tax effect.

Premiums and discounts on collateralized mortgage obligations (CMOs)
are amortized over the estimated redemption period as opposed to the
stated maturities.

Equity securities are carried at market value.  Unrealized gains and
losses on equity securities, net of deferred income taxes, if
applicable, are reflected directly in shareholders' equity. Mortgage
loans and policy loans are recorded at unpaid balances. Short-term
investments are carried at cost, which approximates market value,
and generally consist of those fixed maturities and other
investments that are intended to be held less than one year from the
date of purchase.

Real estate is carried at cost less accumulated depreciation, which
is generally calculated using the straight-line method over 20 to 40
years.  Accumulated depreciation on investments in real estate is
$5,243,720 and $5,788,424 at December 31, 1997 and 1996,
respectively. Interest is capitalized on funds expended for
construction of facilities for the Company's own use and for
facilities intended for sale or lease.  Interest cost capitalized
and included as a component of the historical cost of the assets was
approximately $237,000 and $620,000 in 1997 and 1996,
respectively.  No interest cost was capitalized in 1995.

Realized gains and losses on disposal of investments are included in
net income.  The cost of investments sold is determined on the
specific identification basis, except for equity securities, for
which the first-in, first-out method is employed.  When an
impairment of the value of an investment is considered other than
temporary, the decrease in value is reported in net income as a
realized investment loss and a new cost basis is established.

Cash and Cash Equivalents

Short-term investments with maturities of three months or less at
the time of purchase are reported as cash equivalents.

Sale of Real Estate

Net income for 1997 includes $14.0 million (before federal income
tax) resulting from the sale during the fourth quarter of 1997 of
the Bridgepoint Square Office Complex.  The aggregate selling price
was $78 million which was allocated approximately 78.5% to
Investors-NA and 21.5% to Family Life.  The sale closed on December
5, 1997.

Net income for 1996 includes $23.5 million (before federal income
tax) resulting from the sale during the first quarter of 1996 of the
Austin Centre, a hotel/office complex, located in Austin, Texas,
which served as the Company's home office building.  The selling
price was $62.67 million, less $1 million paid to a capital reserve
account for the purchaser.  The property was purchased in 1991 for
$31.275 million.  The book value of the property, $36.8 million, net
of improvements and amortization, was retained and reinvested by the
Company.  The balance of the proceeds of the sale, net of federal
income tax, was used to reduce the Company's senior loan obligations
by $15 million.  The sale closed on March 29, 1996.

Property and Equipment

Property and equipment is stated at cost less accumulated
depreciation.  Depreciation is calculated using straight-line and
accelerated methods over estimated useful lives of 10 to 33 years
for buildings and improvements and 10 years for furniture and
equipment.  Maintenance and repairs are charged to expense when
incurred.  Accumulated depreciation for property and equipment and
home office real estate was $4,517,477 and $4,364,064 at December
31, 1997 and 1996, respectively.

Deferred Acquisition Costs

The cost of acquiring new and renewal business, principally first
year commissions and certain expenses of the policy issuance and
underwriting departments, which vary with and are primarily related
to the production of new and renewal business, have been deferred to
the extent recoverable.  Acquisition costs related to universal life
products are deferred and amortized in proportion to the ratio of
estimated annual gross profits to total estimated gross profits over
the expected lives of the contracts.  Acquisition costs related to
traditional life insurance business are deferred and amortized over
the premium paying period of the related policies.

Present Value of Future Profits

The present value of future profits of acquired traditional life
business is amortized over the premium paying period of the related
policies in proportion to the ratio of the annual premium revenue to
total anticipated premium revenue applicable to such policies.
Interest on the unamortized balance is accreted at rates from 8.5%
to 9%.

For interest-sensitive products, these costs are amortized in
relation to the present value, using the current credited interest
rate, of expected gross profits of the policies over the anticipated
coverage period.

Retrospective adjustments of these amounts are made periodically
upon the revision of estimates of current or future gross profits on
universal life-type products to be realized from a group of
policies.  Recoverability of present value of future profits is
evaluated periodically by comparing the current estimate of future
profits to the unamortized asset balances.

Anticipated investment returns, including realized gains and losses,
from the investment of policyholder balances are considered in
determining the amortization of present value of future profits
acquired.

Deferred Financing Costs

Financing costs associated with the Company's Senior Loan have been
deferred and are being amortized over the borrowing periods using
the interest method.

Separate Accounts

Separate account assets, carried at market value, and liabilities
represent policyholder funds maintained in accounts having specific
investment objectives.  The net investment income, gains and losses
of these accounts, less applicable contract charges, generally
accrue directly to the policyholders and are not included in the
Company's statement of income.

Solvency Laws Assessments

The solvency or guaranty laws of most states in which the Company's
insurance subsidiaries do business may require the Company's
insurance subsidiaries to pay assessments (up to certain prescribed
limits) to fund policyholder losses or liabilities of insurance
companies that become insolvent.  These assessments may be deferred
or forgiven under most guaranty laws if they would threaten an
insurer's financial strength and, in certain instances, may be
offset against future premium taxes.  The Company's insurance
subsidiaries record the expense for guaranty fund assessment from
states which do not allow premium tax offsets in the period
assessed.  The Company's insurance subsidiaries recorded expenses of
$70,253, $100,165, and $241,692 in the years ended December 31,
1997, 1996 and 1995, respectively, as a result of such assessments.

Policy Liabilities and Contractholder Deposit Funds

Liabilities for future policy benefits related to traditional life
products are computed using the net level premium method or an
equivalent actuarial method.  Assumptions for future investment
yields are incorporated in these liabilities (principally 8% for
guaranteed premium products).  Assumptions for mortality and
withdrawal, based on industry and Company experience for all
products, include provisions for possible unfavorable deviations.
The liability for future policy benefits for traditional life
policies is graded to reserves stipulated by regulatory authorities
over a 30-year period or the end of the premium paying period, if
less.

Contractholder deposit funds are liabilities for universal life and
annuity products.  These liabilities consist of deposits received
from customers and accumulated net investment income on their fund
balances, less administrative charges.  Universal life fund balances
are also assessed mortality charges.  The cash value benefit for
these products is based on actual crediting rates, which are lower
than assumed investment yields.

Liabilities for future policy benefits related to non-cancelable and
guaranteed renewable accident and health contracts are computed
based on industry and Company experience and estimated future
investment yields ranging from 4 1/2% to 6%.  Unearned premium
reserves for credit life and accident and health contracts are
computed on either the sum-of-the-year's digits or pro rata methods
depending upon the type of coverage.

Other Policy Claims and Benefits Payable

The liability for other policy claims and benefits payable
represents management's estimate of unpaid losses on claims and
other miscellaneous liabilities to policyholders.  Estimated unpaid
losses on claims are comprised of losses on claims that have been
reported but not yet paid, including estimates of additional
development of initial claims estimates, and claims that have been
incurred but not yet reported (IBNR) to the Company.

The liability for other policy claims and benefits payable is
subject to the impact of changes in claim severity, frequency and
other factors.  Although there is considerable variability inherent
in such estimates, management believes that the liability recorded
is adequate.

Revenue Recognition

Premiums on traditional life and health products are recognized as
revenue over the premium paying period when due.  Credit life and
credit health insurance premiums are recognized over the contract
period on a pro rata basis, or the sum of years digits basis.
Benefits and expenses are associated with earned premiums, so as to
result in recognition of profits over the lives of the contracts.

Proceeds from investment-related products and universal life
products are recorded as liabilities when received.  Revenues for
investment-related products consist of contract charges assessed
against the deposit fund values and net investment income.  Related
benefit expenses primarily consist of interest credited to the fund
values after deductions for investment and policy charges.  Revenues
for universal life products consist of net investment income,
mortality and administration charges against deposits and fund
values and surrender charges assessed against the fund values.
Related benefit expenses include universal life benefit claims in
excess of fund values and interest credited to universal life fund
values.

Net Income Per Share

Net income per share is calculated based on two methods, basic
earnings per share and diluted earnings per share. Basic earnings
per share is computed by dividing income available to common
shareholders by the weighted average number of common shares
outstanding during the period.  Diluted earnings per share reflects
the potential dilution that could occur if securities or other
contracts to issue common stock were converted or exercised.  Both
methods are presented on the face of the income statement.

Federal Income Taxes

In February, 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards  No. 109, "Accounting
for Income Taxes" (FAS 109).  The Company adopted FAS 109 on a
prospective basis effective January 1, 1993.  FAS 109 mandates the
asset and liability method for computing deferred income taxes.
Under this method, balance sheet amounts for deferred income taxes
are computed based on the tax effect of the differences between the
financial reporting and federal income tax basis of assets and
liabilities using the tax rates which are expected be in effect when
these differences are anticipated to reverse.

New Accounting Pronouncements

In February 1997, the Financial Standards Board ("FASB") issued FAS
No. 128, "Earnings Per Share", which revises the standards for
computing earnings per share previously prescribed by APB Opinion
No. 15, "Earnings Per Share".  The Statement establishes two
measures of earnings per share.  Basic earnings per share is
computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding during the
period.  Diluted earnings per share reflects the potential dilution
that could occur if securities or other contracts to issue common
stock were converted or exercised.  The Statement requires dual
presentation of basic and diluted earnings per share on the face of
the income statement for all entities with potentially dilutive
securities outstanding.

The Statement also requires a reconciliation of the numerator and
denominator of the basic earnings per share computation to the
numerator and denominator of the diluted earnings per share
computation.  The Statement is effective for interim and annual
periods ending after December 15, 1997.  The Company adopted SFAS
No. 128 for the year ended December 31, 1997 and has restated the
earnings per share computations for 1996 and 1995 to conform to this
pronouncement.

In June 1997, the FASB issued FAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of
comprehensive income and its components in a financial statement
with the same prominence as other financial statements.
Comprehensive income is defined as net income adjusted for changes
in stockholders' equity resulting from events other than net income
or transactions related to an entity's capital instruments.  The
Company is required to adopt FAS 130 effective January 1, 1998, with
reclassification of financial statements for earlier years required.

In June 1997, the FASB issued FAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which
establishes standards for reporting information about operating
segments.  Generally, FAS 131 requires that financial information be
reported on the basis that is used internally for evaluating
performance.  The Company is required to adopt FAS 131 effective
January 1, 1998, and comparative information for earlier years must
be restated.  This statement does not need to be applied to interim
financial statements in the initial year of application.

In February 1998, the FASB issued FAS No. 132, "Employers
Disclosures about Pensions and Other Postretirement Benefits," which
revises current disclosure requirements for employers' pension and
other retiree benefits. FAS 132 does not change the measurement or
recognition of pension or other postretirement benefit plans.  The
Company is required to adopt FAS 132 effective January 1, 1998, with
restatement of disclosures for earlier years required.

In December 1997, the Accounting Standards Executive Committee
issued Statement of Position ("SOP") 97-3, "Accounting by Insurance
and Other Enterprises for Insurance-Related Assessments," which
provides guidance on accounting for insurance-related assessments.
The Company is required to adopt SOP 97-3 effective January 1, 1999.
Previously issued financial statements should not be restated unless
the SOP is adopted prior to the effective date and during an interim
period.

2. Investments

Fixed Maturities

The amortized cost, gross unrealized gains and losses and market
values of fixed maturities available for sale and fixed maturities
held to maturity at December 31, 1997 and 1996, respectively were as
follows (in thousands):


                                       Gross    Gross
                              Amort-   Unreal-  Unreal-
                               ized    ized     ized     Market
                               Cost     Gains   Losses   Value
Fixed Maturities Available
 For Sale as of December 31,
 1997:
U.S. Treasury securities and
 obligations of U.S.
 government agencies and
 corporations                 $ 24,556 $ 1,334   $   65  $ 25,825
Obligations of states and
 political subdivisions          4,686     349      -0-     5,035
Corporate securities           119,847   4,696      630   123,913
Mortgage-backed securities     287,747  12,458      516   299,689
Total Fixed Maturities
 Available For Sale            436,836  18,837    1,211   454,462
Fixed Maturities Held to
 Maturity:
Private placements-corporate     3,412      20      100     3,332
Total Fixed Maturities        $440,248 $18,857   $1,311  $457,794

Fixed Maturities Available
 For Sale as of December 31,
 1996:
U.S. Treasury securities and
 obligations of U.S.
 government agencies and
 corporations                 $ 13,817  $  902  $    18  $ 14,701
Obligations of states and        4,727     163      -0-     4,890
 political subdivisions
Foreign government debt
 securities                          5     -0-      -0-         5
Corporate securities           120,263   2,582    3,625   119,220
Mortgage-backed securities     312,738   7,473    5,131   315,080
Total Fixed Maturities
 Available For Sale            451,550  11,120    8,774   453,896
Fixed Maturities held to
 Maturity:
Private placements-corporate     8,165     320      111     8,374
  Total Fixed Maturities      $459,715 $11,440  $ 8,885  $462,270

In determining the amounts reflected in the balance sheet, the
Company has reduced its gross unrealized gains and losses on
investments in fixed maturities available for sale as reflected
above by $6,169,000 and $821,000 in 1997 and 1996, respectively, in
determining the net  unrealized gain on investments in fixed
maturities available for sale recorded as a component of
shareholders' equity.  The adjustment is made to recognize deferred
taxes on the net unrealized gain.

The amortized cost and market value of fixed maturities carried at
amortized cost at December 31, 1997 is shown below by contractual
maturity.  Actual maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.


                               Fixed Maturities Available for Sale
                                  Amortized                Market
                                   Cost                    Value
                                          (in thousands)
Due in one year or less......    $  5,475                  $  5,491
Due after one through
  five years.................      21,727                    22,612
Due after five through ten
  years......................      25,237                    26,213
Due after ten years..........      96,650                   100,457
Mortgage backed securities...     287,747                   299,689

     Total Fixed Maturities
     Available for Sale          $436,836                  $454,462

                            Fixed Maturities Held to Maturity
                            Amortized                  Market
                              Cost                     Value
                                      (in thousands)
Due in one year or less..... $   -0-                $   -0-
Due after one through
  five years................   2,503                   2,425
Due after five through ten
  years.....................     830                     807
Due after ten years.........
Mortgage backed securities..      79                      99

     Total Fixed Maturities
     Held to Maturity        $ 3,412                 $ 3,332

Proceeds from sales and maturities of investments in fixed
maturities during 1997, 1996 and 1995 were approximately
$57,840,000, $53,888,000, and $47,316,000.  Gross gains of
approximately $293,000, $322,000, and $578,000 and gross losses of
approximately $ 123,000, $100,000, and $22,000 were realized on
those sales and maturities in 1997, 1996 and 1995, respectively.

Equity Securities

The change in net unrealized appreciation for equity securities was
$2,601,000 and $780,000 for the years ended December 31, 1997 and
1996, respectively.  Amounts as of December 31 were as follows:

                                           1997          1996
                                              (in thousands)
Unrealized appreciation                 $  4,543      $  1,946
Unrealized depreciation                      (11)          (15)
Net unrealized appreciation before tax      4,532        1,931
Less: Federal income tax                   (1,586)        (676)
Net unrealized appreciation              $  2,946     $  1,255

Net Investment Income

The components of net investment income are summarized as follows:

                                         Year Ended December 31,
                                         1997     1996          1995
                                             (in thousands)

Fixed maturities                       $46,570  $47,448  $49,329
Equity securities                           10       12       65
Other, including policy loans,
 real estate and mortgage loans         14,826   15,708   19,392
                                        61,406   63,168   68,786
Investment expenses                     (3,666)  (3,332)  (4,005)

Net investment income                  $57,740  $59,836  $64,781


Realized Gains and Losses

Net realized gains (losses) included in net investment income are
summarized below:
                                         Year Ended December 31,
                                         1997     1996          1995
                                             (in thousands)

Fixed maturities available for sale     $  171      $  222   $  556
Equity securities                           (2)          1      (26)
Other investments                            6        (256)     (97)
                                           175          33      433
Income taxes                                61          12      152

Net realized gains                      $  114      $   21   $  281

Non-income producing investments

The carrying value of non-income producing investments were as
follows as of December 31:
                                             1997          1996
                                                (in thousands)
Fixed maturities                            $  -0-       $   100
Mortgage loans                                  81            81
Total                                       $   81       $   181

Mortgage loans and invested real estate

The Company's mortgage loans and invested real estate are
diversified by property type, location and issuer.  Mortgage loans
are collateralized by the related properties and such loans
generally range from 15% to 80% of the property's value at the time
the loan is made.  No new mortgage loans were made during the three
year period ended December 31, 1997.

Financial Industries Corporation

Equity securities includes a $4,709,251 investment, ($318,390 at
cost), in 189,750 shares of common stock of Financial Industries
Corporation (FIC) (See Note 9).  This represents 3.5% of FIC's
outstanding common stock at December 31, 1997.

3. Disclosures about Fair Value of Financial Instruments

The estimated fair values of the Company's financial instruments at
December 31, 1997 are as follows:
                                              Carrying   Fair
                                               Amount    Value
                                                (in thousands)
Financial assets:
Fixed maturities                                $457,849      $457,794
Policy loans                                      53,499        53,499
Mortgage loans                                    10,862        11,307
Short-term investments                           164,622       164,622
Cash and cash equivalents                       9,041            9,041
Notes receivable from affiliates                  53,792        53,792

                                              Carrying    Fair
                                               Amount     Value
                                                (in thousands)
Financial liabilities:
Deferred annuities                            $107,147 $106,420
Supplemental contracts                          11,826   11,317
Senior loans                                    10,964   10,964


The following methods and assumptions were used to estimate the fair
value of each class of financial instrument:

Fixed maturities

Fair values are based on quoted market prices or dealer quotes.

Policy loans

Policy loans are, generally, issued with coupon rates below market
rates and are considered early payment of the life benefit.  As
such, the carrying amount of these financial instruments is a
reasonable estimate of their fair value.

Mortgage loans

The fair value of mortgage loans is estimated using a discounted
cash flow analysis using rates for BBB- rated bonds with similar
coupon rates and maturities.

Cash and cash equivalents and short-term investments

The carrying amount of these instruments approximates market value.

Notes receivable from affiliates

The fair value is based on redemption value.

Senior loans

The fair value has been set at the price to call the debt.

Deferred annuities and supplemental contracts

The fair value of deferred annuities is estimated using cash
surrender values.  Fair values for supplemental contracts is
estimated using a discounted cash flow analysis, based on interest
rates currently offered on similar products.

<PAGE>
4. Present Value of Future Profits of Acquired Business

An analysis of the present value of future profits of acquired
businesses is as follows:

                                         1997           1996
                                              (in thousands)
Beginning balance                      $  45,240      $  48,606
Acquisition of insurance subsidiary        8,357            -0-
Accretion of interest                      3,786          4,401
Amortization                             (10,097)        (7,767)
Ending balance                         $  47,286      $  45,240

Amortization of the present value of future profits included in the
consolidated statements of income is presented net of the accretion
of interest.

The estimated amount of present value of future profits to be
amortized net of interest accretion during each of the next five
years is as follows:
                                           (in thousands)

                              1998             $ 5,366
                              1999             $ 3,472
                              2000             $ 3,063
                              2001             $ 2,755
                              2002             $ 2,403

5. Acquisition of Business

On July 9, 1997, ILCO and Investors-Indiana acquired State Auto Life
Insurance Company, an Ohio domiciled life insurer, from State
Automobile Mutual Insurance Company, for an adjusted cash purchase
price of $11.8 million.  The transaction was accounted for as a
purchase business combination.  Accordingly, the results of State
Auto Life's operations are included in income from the date of the
acquisition. The purchase price was allocated to the fair values of
the assets and liabilities acquired including the present value of
future profits disclosed in Note 4.  Under the terms of the
transaction, State Auto Life was merged into Investors-Indiana.

On February 14, 1995, the Company and Investors-NA completed the
purchase of Meridian Life Insurance Company (MLIC), a life insurer
domiciled in Indiana, from Meridian Mutual Insurance Company.  Under
the terms of the agreement, the Company acquired approximately 82%
of the outstanding common stock of MLIC for $14 million.  Investors-
NA acquired the remaining 18% for $3 million.  Immediately after
finalizing the transaction, ILCO contributed its acquired shares to
unassigned surplus of Investors-NA, resulting in MLIC being a wholly
owned subsidiary of Investors-NA.  ILCO's senior loan was increased
by $15 million (through an amendment to the loan agreement) to fund
its portion of the purchase price.  Subsequent to the purchase,
MLIC's name was officially changed to Investors Life Insurance
Company of Indiana (Investors-Indiana).  The transaction was
accounted for as a purchase business combination.  Accordingly, the
results of Investors-Indiana's operations are included in income
from the date of the acquisition.  The purchase price was allocated
to the fair values of the assets and liabilities acquired, including
the present value of future profits disclosed in Note 4.

The pro forma unaudited results of operations for the year ended
December 31, 1995, assuming the acquisition of MLIC had been
consummated as of the beginning of 1994, is as follows:

                                           Unaudited
                                             1995
                                      (in thousands, except
                                          per share data)

Total revenues                             $123,905
Net income                                 $ 10,391
Net income per share
 available to common shareholders:
Basic                                     $   2.49
Dilutive                                  $   2.39

6. Senior Loans

The Company's outstanding debt at December 31, 1997 and 1996
consists of a series of separate notes, each of which is payable to
a member bank of a lending syndicate with principal payments
beginning April 1, 1993 and a final payment on or before October 1,
1998.  The balance of the notes was $10,964,000 and $24,944,000 at
December 31, 1997 and 1996, respectively.  Interest is payable at
the Company's option based on (1) the managing bank's corporate base
rate plus 1.25% declining to .5% as principal declines, or (2) LIBOR
plus 2.5% declining to 1.75%.  The rate in effect at December 31,
1997 and 1996 was 7.68% and 7.56%, respectively.

The obligations of the Company under the Senior Loans are secured
by:  (1) all of the outstanding shares of stock of Investors-NA, (2)
a $15,000,000 surplus debenture of Investors-NA payable to the
Company, which had an outstanding principal balance of $5,206,224 as
of December 31, 1997 and (3) a $140,000,000 surplus debenture of
Investors-NA payable to the Company, which had an outstanding
principal balance of $22,590,000 as of December 31, 1997.  The
obligations of the Company under the Senior Loans are guaranteed by
FIC.

In February, 1995, the Company borrowed an additional $15 million
under the Senior Loan to help finance the acquisition of
Investors-IN, and the maturity date of the Senior Loan was further
extended to July 1, 1999.  As of December 31, 1995, the outstanding
principal balance of ILCO's senior loan obligations was $59.4
million.  In January, 1996, the Company made a scheduled payment of
$4.5 million under its Senior Loan.  In March, 1996, the Company
made the scheduled payments for April 1st and July 1st, totaling $9
million.  At that same time, the Company made a payment of $941,000,
an additional payment under the terms of the loan applied to the
principal balance.  On April 1, 1996, an optional principal payment
in the amount of $15 million was made, which resulted in advancing
the scheduled payoff date of the Senior Loan to April 1, 1998.  In
July, 1996, the Company made the principal payment for October 1st
($4.5 million), plus an optional principal payment of $0.5 million.
In connection with the acquisition of State Auto Life Insurance
Company in July, 1997, the Senior Loan agreement was modified to
extend the maturity date to October 1, 1998.

7. Income Taxes

The Company files consolidated federal income tax returns with its
non-life subsidiaries.  The Company's life insurance subsidiaries
file a separate life consolidated federal income tax return.  In
accordance with the Company's tax allocation agreement, federal
income tax expense or benefit is allocated to each member of the
consolidated group as if each member were filing a separate return.

The U.S. federal income tax provision charged to continuing
operations for the years ended December 31, was as follows:

                                         1997    1996    1995
                                             (in thousands)

Current tax provision                  $ 9,005  $10,227 $   945
Deferred tax provision                   2,057    4,278   4,824
  Total provision for income taxes     $11,062  $14,505 $ 5,769

Provision has not been made for state and foreign income tax expense
since expense is minimal.  Premium taxes are paid to various states
where premium revenues are earned.  Premium taxes are included in
the statement of income as operating expenses.

The provision for income taxes does not differ from the amount of
income tax determined by applying the U.S. statutory federal income
tax rate of 35% to pre-tax income from continuing operations.
Deferred taxes are recorded for temporary differences between the
financial reporting bases and the federal income tax bases of the
Company's assets and liabilities.  The sources of these differences
and the estimated tax effect of each are as follows:



                                    December 31,
                                  1997       1996
Deferred Tax Liability:            (in thousands)

Deferred policy acquisition
 costs                          $  5,773   $  4,989
Present value of future profits   13,689     11,715
Invested assets                      -0-        769
Net unrealized appreciation on
 marketable securities             7,755      1,497
Acquisition discounts on
 mortgages/policy loans            1,458      1,984
Reinsurance recoverable            6,212      3,268
Other taxable temporary
 differences                       1,547      2,876
Total deferred tax liability      36,434     27,098

Deferred Tax Asset:

Policy Reserves                    2,858      1,594
Net operating loss carry forward   1,465      1,512
Minimum tax credit                   300        300
Total deferred tax asset           4,623      3,406

     Net deferred tax liability $ 31,811   $ 23,692

Deferred federal income tax expense (benefit) of $6,258,000 and
($5,872,000) for 1997 and 1996, respectively, have been provided on
the unrealized  appreciation (depreciation) of marketable securities
and included in the balance of the deferred tax liability account.
This increase or decrease in deferred tax liability has been
recorded as a reduction or increase to the equity adjustment due to
the net change in unrealized appreciation or depreciation and has
not been reflected in the deferred income tax expense included in
net income from operations.

Under the provisions of pre-1984 life insurance company income tax
regulations, a portion of "gain from operations" of Investors-IN and
Investors-NA was not subject to current taxation but was
accumulated, for tax purposes, in special tax memorandum accounts
designated as "policyholders' surplus accounts". Subject to certain
limitations,"policyholders' surplus" is not taxed until  distributed
or the insurance company no longer qualifies to be taxed as a life
insurance company.  The accumulation in these accounts for
Investors-NA and Investors-IN at December 31, 1997 and 1996 was
$8,225,000 and $4,357,000, respectively.  Federal income tax of
$2,879,000 and $1,525,000 would be due if the entire balance is
distributed at a tax rate of 35%.

The Company does not anticipate any transactions that would cause
any part of the policyholders' surplus accounts to become taxable
and, accordingly, deferred taxes have not been provided on such
amounts.  At December 31, 1997, Investors-NA and Investors-IN have
approximately $120,000,000 and $12,200,000, respectively, in the
aggregate in their shareholders' surplus accounts from which
distributions could be made without incurring any federal tax
liability.

At December 31, 1997, the Company and its non-life wholly-owned
subsidiaries have net operating loss carryforwards of approximately
$4.2 million.

At December 31, 1997, there were no IRS examinations in progress for
the Company or its subsidiaries.

8. Reinsurance

The Company reinsures portions of certain policies thereby providing
greater diversification of risk and minimizing exposure on larger
policies.  The Company's retention on any one individual ranges from
$60,000 to $250,000 depending on the risk. The Company remains
liable to the extent the reinsurance companies are unable to meet
their obligations under the reinsurance agreements.

In December, 1997, ILCO's life insurance subsidiaries entered into
a reinsurance treaty under which all of the contractual obligations
and risks under accident and health insurance policies were assumed
by a third party reinsurer.  The transfer is effective as of July 1,
1997.  These risks and contractual obligations were sold pursuant
to, first, a coinsurance reinsurance agreement.  Following
applicable regulatory approvals, the reinsurer will assume the
direct obligations of the companies, on an assumption reinsurance
basis.  The decision to dispose of this block of business was based
on management's analysis that the business was not generating
targeted profit objectives and that the products were not part of
the core business of the subsidiaries.  The sale permits the
companies to focus on its primary business: life insurance and
annuity sales.  In connection with the transaction, the total amount
of net reserves transferred by the subsidiaries was $6,327,504.  In
addition to the transfer of reserves, the life companies paid the
reinsurer $1,037,150 in connection with the transaction, which
amount was accounted for as an expense for the year ended December
31, 1997.  In 1997, the transferred business generated approximately
$791,000 in annualized premiums.

The amounts reported in the consolidated financial statements for
reinsurance ceded are as follows:


                                            December 31,
                                        1997           1996
                                           (in thousands)

Future policy benefits                 $10,008        $ 7,314
Unearned premiums                        7,501          1,946
Other policy claims and benefits
 payable                                   240             76
Amounts recoverable on paid claims       2,684          2,787
Reinsurance receivables                $20,433        $12,123


                                       Year ended December 31,
                                    1997      1996        1995
                                          (in thousands)

Premiums                       $   10,438   $   7,962   $   8,568
Policyholder benefits and
 expenses                      $   15,286   $  14,712   $  14,404


9. Shareholders' Equity

The Company is controlled by Financial Industries Corporation
("FIC"), a life insurance holding company, through FIC's ownership
of approximately 45% of the Company's outstanding common stock.  FIC
also holds options to purchase up to an additional 1,702,155 shares
of the Company's authorized but unissued common stock at a price
equal to the average market value during the six months preceding
the exercise date.  If all of these options were exercised at
December 31, 1997, FIC would own approximately 60.84% of the issued
and outstanding shares of the Company's common stock, assuming no
other options or warrants held by other parties were exercised.
These options will expire in October, 1998.

In the event that any other party seeks to acquire the Company's
outstanding shares, FIC has the right to acquire, without prior
approval and under the same pricing formula, the number of shares of
common stock which when added to the number of shares then owned by
FIC, amount to 51% of the outstanding shares of the Company.  These
options will remain in effect as long as any indebtedness guaranteed
by FIC remains outstanding (See Note 6).

The Company's ability to pay dividends to its shareholders is
affected, in part, by the receipt of dividends from Investors-NA,
which is organized under the laws of the state of Washington.  Under
current Washington law, any proposed payment of a dividend or
distribution which, together with dividends or distributions paid
during the preceding twelve months, exceeds the greater of (i) 10%
of statutory surplus as of the preceding December 31 or (ii)
statutory net gain from operations for the preceding calendar year
is called an "extraordinary dividend" and may not be paid until
either it has been approved, or a waiting period shall have passed
during which it has not been disapproved, by the insurance
commissioner.

In addition, Washington laws require that prior notification of a
proposed dividend be given to the Washington Insurance Commissioner
and that dividends may be paid only from earned surplus.

The Senior Loans described in Note 6 restrict the Company from
paying any dividends on its common stock during their term.

Net income (before surplus debenture interest expense) and capital
and surplus of Investors-NA as reported to insurance regulators and
as determined in accordance with statutory accounting practices are
as follows:


                                  Year Ended December 31
                              1997         1996         1995
                                      (in thousands)

Net Income                 $  25,925    $  33,068    $  23,810
Capital and Surplus        $  73,932    $  56,174    $  61,896

The insurance regulations of the state of Washington limit the
amount an insurer may invest in the obligations of any one
corporation to four percent of the insurer's statutory admitted
assets.  Investors-NA held $46,057,300 and $51,211,460 in
subordinated notes issued by Family Life Corporation, a wholly-owned
subsidiary of FIC, at December 31, 1997 and 1996, respectively.
This investment exceeds the limit on investments prescribed by the
state of Washington by $2,606,560 and $8,787,303 at December 31,
1997 and 1996, respectively.  Prior to the acquisition of these
notes, Investors-NA received written approval from the Washington
State Insurance Department for the inclusion of the full amount of
these notes in its statutory admitted assets.  At December 31, 1997
and 1996, this permitted practice increased statutory surplus by
$2,606,560 and $8,787,303 over what it would have been under
prescribed statutory accounting practices.

In 1988, the Company authorized the issuance of 10 million shares of
Class C Preferred Stock, $1.00 par value.  The Company is not
permitted, under the provisions of the Senior Loan Agreements (See
Note 6), to issue any preferred stock except Class A and Class B
issued in connection with the acquisition of the Investors Life
Companies.  The Company has reacquired the Class A and Class B
Preferred Stock and holds the shares in treasury.


10. Retirement Plans and Employee Stock Plans

Retirement Plan

The Company maintains a retirement plan, ("ILCO Pension Plan"),
covering substantially all employees of the Company.   The plan is
a non-contributory, defined benefit pension plan, which covers each
eligible employee who has attained 21 years of age and has completed
one year or more of service.  Each participating subsidiary company
contributes an amount necessary (as actuarially determined) to fund
the benefits provided for its participating employees.

The Plan's basic retirement income benefit at normal retirement age
is 1.57% of the participant's average annual earnings less 0.65% of
the participant's final average earnings up to covered compensation
multiplied by the number of his/her years of credited service.  For
participants who previously participated in the plan maintained by
the Company for the benefit of former employees of the IIP Division
of CIGNA Corporation (the IIP Plan), the benefit formula described
above applies to service subsequent to May 31, 1996.  With respect
to service prior to that date, the benefit formula provided by the
IIP Plan is applicable, with certain exceptions applicable to former
IIP employees who are classified as highly compensated employees.

Former eligible IIP employees commenced participation automatically.
The Plan also provides for early retirement, postponed retirement
and disability benefits to eligible employees.  Participant benefits
become fully vested upon completion of five years of service, as
defined, or attainment of normal retirement age, if earlier.

The pension costs for all plans include the following components:

                                          1997             1996
                                            (in thousands)
Service cost-benefits earned
 during the period                     $   390          $   502

Interest cost on projected
 benefit obligation                        693              686

Return on plan assets                   (1,226)          (1,128)

Amortization                              (229)            (229)

Pension benefit                        $  (372)         $  (169)


The following summarizes the funded status of the plans at December
31:
                                          1997              1996
                                             (in thousands)

Actuarial present value of:
  Vested benefit obligation           $  (9,778)         $ (7,726)

  Accumulated benefit obligation      $  (9,968)         $ (7,914)

Projected benefit obligation          $ (11,162)         $ (8,936)

Plan assets at market value              15,681            15,322

Plan assets in excess of projected
  benefit obligations                 $   4,519          $  6,386

Unrecognized prior service cost       $    (698)         $   (926)

Unrecognized net loss (gain)          $     693          $ (1,317)

Prepaid pension expense               $   4,514          $  4,143


The significant assumptions for the plans are as follows:

The discount rate for projected benefit obligations was 7.75% in
1997 and 1996. The assumed long-term rate of compensation increases
was 6.0% for 1997 and 1996.  The long-term rate of return on plan
assets was 8.0% for 1997 and 1996.  Assumed expenses as a percentage
of plan assets were 0% and 0.5% for 1997 and 1996, respectively.

Savings and Investment Plan

The Company maintains a Savings and Investment (401(k)) Plan that
allows eligible employees who have met a one-year service
requirement to make contributions to the Plan on a tax-deferred
basis.  A Plan participant may elect to contribute up to 16% of
eligible earnings on a tax deferred basis, subject to certain
limitations applicable to "highly compensated employees" as defined
in the Internal Revenue Code.  Plan participants may allocate
contributions, and earnings thereon, between investment options
selected by participants.  The Account Balance of each Participant
attributable to employee contributions is 100% vested at all times.
Prior to January 1, 1990, the Company made matching contributions of
up to 50% of the first 6% of eligible compensation contributed by
the plan participants.  Vesting of such Company contributions is
based on number of years of service.  The employer contributions
were discontinued effective January 1, 1990.

During 1995, the Plan was amended to allow for the addition of
Family Life Insurance Company (FLIC), a wholly-owned subsidiary of
FIC, as a participating employer, thus allowing FLIC employees to
participate in the Plan.  The amendment did not affect the Plan's
tax-qualified status.

In 1997, the Plan was amended to provide for a matching contribution
by the Company.  The match, which is in the form of shares of ILCO
common stock, is equal to 100% of an eligible participant's elective
deferral contributions, as defined in the Plan, not to exceed 1% of
the participant's plan compensation.  Allocations are made on a
quarterly basis to the account of participants who have at least 250
hours of service in that quarter.

Employee Stock Ownership Plan

During 1979, the Company established an Employee Stock Ownership
Plan and a related trust for the benefit of its employees.  The Plan
generally covers employees who have attained the age of 21 and have
completed one year of service.  Vesting of benefits to employees is
based on number of years of service.  No contributions were made to
the Plan in 1997, 1996 or 1995.  At December 31, 1997, the Plan had
a total of 350,296 shares which are allocated to participants and no
shares remain unallocated.

During 1995, the Plan was amended to allow for the addition of FLIC
as a participating employer, thus allowing FLIC employees to
participate in the Plan.  The amendment did not affect the Plan's
tax-qualified status.

Stock Option Plans

The Company applies APB Opinion No. 25 and related Interpretations
in accounting for its stock option plans, which are described below
accordingly.  No compensation cost has been recognized by the
Company in the accompanying income statement for its stock option
plans.  Had compensation cost for the Company's stock option plans
been determined based on the fair market value at the grant dates
for awards under those plans consistent with the method provided by
FAS No. 123, the impact to the Company's net income would have been
immaterial.

Under the Company's Incentive Stock Option Plan, options to purchase
shares of the Company's common stock, at 100% of fair market value
on the date of grant, have been granted to key employees.  A total
of 315,000 shares of the Company's common stock are currently
reserved for issuance under this  plan.  As of December 31, 1997,
options to purchase 327,850 shares have been granted since the
plan's inception. As of December 31, 1997, 233,750 options have been
exercised and 86,100 options have been terminated.

At December 31, 1997 there were no options remaining under the ISO
Plan to purchase shares of the Company's common stock. The number of
options exercised in 1997, 1996 and 1995 were 72,000, 9,500 and
11,000, respectively.

Under the Non-Qualified Stock Option Plan for certain officers,
directors, agents and others, the Board of Directors is authorized
to issue options to purchase up to 600,000 shares of the Company's
common stock at 100% of the fair market value on the date of grant
but in no case less than $3.33 per share.  In 1988, options to
purchase 330,000 shares were granted at a price of $3.33 per share.
In 1991, options to purchase 50,000 shares were granted at prices
ranging from $8.75 to $9.25.  In 1992 and 1990 options to purchase
60,000 and 30,000 shares respectively, expired.  In 1995, options to
purchase 60,000 shares were granted at a price of $11.12 per share.
These same options, along with 20,000 other options, were terminated
in 1996. In 1997 42,000 shares were cancelled.  There were no
options granted in 1997 and 1996.  The number of options exercised
in 1997, 1996 and 1995 were 48,000, 48,000 and 48,000, respectively.


The following table summarizes activity under all Plans for each of
the three years ended December 31, 1997:
                                             1995     Weighted
                                                       Average
                                           Shares     Exercise
                                           (000's)      Price
Outstanding at the
 beginning of the year                         383     $ 4.58
    Granted                                     60      11.12
    Exercised                                  (59)      3.67
    Canceled                                     0       0.00
Outstanding at the end of the year             384     $ 5.75

Options exercisable at year end                130     $ 4.70

Weighted average fair value of
 options granted during the year                60    $ 11.12

                                               1996   Weighted
                                                      Average
                                           Shares     Exercise
                                           (000's)    Price
Outstanding at the
 beginning of the year                         384    $ 5.75
    Granted                                      0      0.00
    Exercised                                  (58)     4.24
    Canceled                                   (80)    10.65
Outstanding at the end of the year             246    $ 4.50

Options exercisable at year end                120    $ 4.38

Weighted average fair value of
 options granted during the year                      $  -0-

                                               1997   Weighted
                                                      Average
                                           Shares     Exercise
                                           (000's)    Price
Outstanding at the
 beginning of the year                       246      $ 4.50
    Granted                                    0        0.00
    Exercised                               (120)       4.38
    Canceled                                 (42)       7.20
Outstanding at the end of the year            84      $ 3.33

Options exercisable at year end              -0-      $  -0-

Weighted average fair value of
 options granted during the year                      $  -0-

 As of December 31, 1997:                         Options
                                                Outstanding
                                               weighted-average
                               Number             remaining
    Range of                 Outstanding          contractual
exercise prices           December 31, 1997       Life (years)

 $ 3.33                         84,000              1 year

 $13.09                      1,702,155              1 year

    Range of             Weighted Average
exercise prices           Exercise price

 $ 3.33                       $ 3.33

 $13.09                       $13.09

   Range of            Number exercisable        Weighted average
Exercise prices         December 31, 1997         exercise price

 $ 3.33                          -0-                     -0-

 $13.09                          -0-                     -0-

In 1989 options to purchase 600,000 shares of the Company's common
stock at $1.00 per share (as adjusted for the three for one stock
split effective February 15, 1990) were granted by the Board of
Directors to the Company's Chairman of the Board.  These options
became exercisable upon approval of the Board of Directors in annual
installments of 150,000 shares each.  The last installment was
granted in 1992.  In 1992, the chairman surrendered for cancellation
120,000 of these options.  In October of 1993, the Company entered
into an agreement with the Chairman, whereby the Chairman agreed to
surrender all of his remaining common stock options between 1993 and
1996.  Pursuant to this agreement, all remaining options were
surrendered through December 31, 1996, (see Note 12).

11. Leases

The Company and its subsidiaries occupy office facilities under
lease agreements which expire at various dates through 2005.
Certain office space leases may be renewed at the option of the
Company.

Rent expense in 1997, 1996, and 1995 was $3,147,037, $2,466,679,
$2,531,085,  respectively, under these lease agreements.  Minimum
annual future rentals are as follows:
                                              (in thousands)
                                             1998       1,758
                                             1999       1,670
                                             2000       1,670
                                             2001       1,670
                                             2002       1,424
                                      Thereafter        1,944
                                                     $ 10,136

12. Related Party Transactions


The obligations of the Company under the Senior Loan are guaranteed
by FIC.  FIC presently owns 1,966,346 shares of the company's Common
Stock, constituting 45.43% of such shares outstanding, and holds
options to acquire an additional 1,702,155 shares at the average bid
price of such shares during the six-month period preceding the date
of any such purchase.  In the event that such options were to be
fully exercised, the total number of the Company's shares owned by
FIC would constitute 60.84% of the outstanding shares of the
Company's Common Stock. As described in Note 6, the current Senior
Loan of ILCO is scheduled to be fully repaid on October 1, 1998.
Accordingly, unless ILCO s Senior Loan is extended, or ILCO
otherwise incurs indebtedness which is guaranteed by FIC, FIC s
rights under the 1986 option agreement would expire on October 1,
1998.


FIC Property Management, Inc., ("FIC Property"), a subsidiary of
FIC, conducted the leasing activities for the Bridgepoint Square
properties previously owned by Investors-NA.

In connection with the December, 1997 sale of Bridgepoint Square
Offices by Investors-NA and Family Life Insurance Company, FIC
Realty Services, Inc., ("FIC Realty"), a subsidiary of FIC,
received a commission in the amount of $156,000, of which $122,538
was paid by Investors-NA and $33,462 by Family Life.  In connection
with the 1996 sale of Austin Centre by Investors-NA, FIC Realty
received a commission in the amount of $123,350 from Investors-NA.

As part of the financing arrangement for the acquisition of Family
Life Insurance Company, Family Life Corporation ("FLC"), a
subsidiary of FIC, entered into a senior loan agreement under which
$50 million was provided by a group of banks.  The balance of the
financing consisted of a $30 million subordinated note issued by FLC
to Merrill Lynch Insurance Group, Ins. ("Merrill Lynch") and $14
million borrowed by another subsidiary of FIC from an affiliate of
Merrill Lynch and evidenced by a senior subordinated note in the
principal amount of $12 million and a junior subordinated note in
the principal amount of $2 million and $25 million lent by two
insurance company subsidiaries of ILCO. The latter amount was
represented by a $22.5 million loan from Investors-NA to FLC and a
$2.5 million loan provided directly to FIC by Investors-CA.  In
addition to the interest provided under those loans, Investors-NA
and Investors-CA were granted by FIC non-transferable options to
purchase, in the amounts proportionate to their respective loans, up
to a total of 9.9 percent of shares of FIC's common stock at a price
of $10.50 per share ($2.10 per share as adjusted for the five-for-
one stock split in November, 1996), equivalent to the then current
market price, subject to adjustment to prevent dilution.  The
original provisions of the options provided for their expiration on
June 12, 1998 if not previously exercised. In connection with the
1996 amendments to the subordinated notes, as described below, the
expiration date of the options were extended to September 12, 2006.

On July 30, 1993, the subordinated indebtedness owed to Merrill
Lynch and its affiliate was prepaid.  The Company paid $38 million
plus accrued interest to retire the indebtedness, which had a
principal balance of approximately $50 million on July 30, 1993. The
primary source of the funds used to prepay the subordinated debt was
new subordinated loans totaling $34.5 million that FLC and another
subsidiary of FIC obtained from Investors-NA.  The principal amount
of the new subordinated debt was payable in four equal annual
installments in 2000, 2001, 2002 and 2003 and bears interest at an
annual rate of 9%.  The other terms of the new debt are
substantially the same as those of the $22.5 million subordinated
loans that Investors-NA had previously made to FLC and that continue
to be outstanding.

In June, 1996, the provisions of the notes from Investors-NA to FIC,
Family Life Corporation ("FLC") and Family Life Insurance Investment
Company ("FLIIC") were modified as follows: (a) the $22.5 million
note was amended to provide for twenty quarterly principal payments,
in the amount of $1,125,000 each, to commence on December 12, 1996;
the final quarterly principal payment is due on September 12, 2001;
the interest rate on the note remains at 11%, (b) the $30 million
note was amended to provide for forty quarterly principal payments,
in the amount of $163,540 each for the period December 12, 1996 to
September 12, 2001; beginning with the principal payment due on
December 12, 2001, the amount of the principal payment increases to
$1,336,458; the final quarterly principal payment is due on
September 12, 2006; the interest rate on the note remains at 9%, (c)
the $4.5 million note was amended to provide for forty quarterly
principal payments, in the amount of $24,531 each for the period
December 12, 1996 to September 12, 2001; beginning with the
principal payment due on December 12, 2001, the amount of the
principal payment increases to $200,469;  the final quarterly
principal payment is due on September 12, 2006; the interest rate on
the note remains at 9%, (d) the $2.5 million note was amended to
provide that the principal balance of the note is to be repaid in
twenty quarterly installments of $125,000 each, commencing December
12, 1996 with the final payment due on September 12, 2001; the rate
of interest remains at 12%, (e) the Master PIK note, which was
issued to provide for the payment in kind of interest due under the
terms of the $2.5 million note prior to June 12, 1996, was amended
to provide that the $1,977,119 principal balance of the note is to
be paid in twenty quarterly principal payments, in the amount of
$98,855.95 each, to commence December 12, 1996 with the final
payment due on September 12, 2001; the interest rate on the note
remains at 12%.

The Company reimbursed FIC for rental expenses and certain other
operating expenses incurred during 1997, 1996 and 1995 on behalf of
the Company. The amount of such reimbursement was approximately
$822,000, $305,000 and $830,000, respectively.

All of the data processing needs of ILCO's and FIC's insurance
subsidiaries are provided to ILCO's and FIC's Austin, Texas and
Seattle, Washington facilities by FIC Computer Services, Inc. ("FIC
Computer"), a subsidiary of FIC.  Each of FIC's and ILCO's insurance
subsidiaries has entered into a data processing agreement with FIC
Computer whereby FIC Computer provides data processing services to
each subsidiary for fees equal to such subsidiary's proportionate
share of FIC Computer's actual costs of providing those services to
all of the subsidiaries.  The Company's insurance subsidiaries paid
$3,010,110 and Family Life paid $824,425 to FIC Computer for data
processing services provided during the year ended December 31,
1997.

In 1995, Investors-NA entered into a reinsurance agreement with
Family Life pertaining to universal life insurance written by Family
Life.  The reinsurance agreement is on a co-insurance basis and
applies to all covered business with effective dates on and after
January 1, 1995.  The agreement applies to only that portion of the
face amount of the policy which is less than $200,000; face amounts
of $200,000 or more are reinsured by Family Life with a third party
reinsurer.

In 1996, Investors-NA entered into a reinsurance agreement with
Family Life, pertaining to annuity contracts written by Family Life.
The agreement applies to contracts written on or after January 1,
1996.

ILCO received $14 million, $14 million, and $15 million from Family
Life Insurance Company for direct costs incurred by ILCO on behalf
of Family Life Insurance Company's operations in 1997, 1996 and
1995, respectively.  Under an agreement between ILCO and Family Life
all direct costs incurred on behalf of the other are to be
reimbursed.

In October of 1993, the Company entered into an agreement with the
Chairman, whereby the Chairman agreed to surrender all of his
remaining common stock options for consideration of $6,847,000 (See
Note 10).  Prior to entering into this agreement, the Company had
accrued compensation expense related to these options of $4,225,000.
Upon entering into the agreement, additional compensation was
recorded totaling $2,622,000 for the year ended December 31, 1993 to
increase total compensation to the surrender price.  Accordingly, a
liability was recorded for the unpaid portion of the agreement.
Pursuant to this agreement, during 1993 the Chairman was paid
$3,237,120 for cancellation of 240,000 of these options and during
1994 he was paid $997,520 for cancellation of 68,500 options and
$379,143 for federal income tax reimbursement relating to the
cancellation of options in 1993.  During 1995, the Chairman was paid
$836,582 for the cancellation in 1995 of options to purchase 50,000
shares of ILCO's Common Stock, $156,323 for the federal income tax
reimbursement relating to the cancellation in 1994 of options to
purchase 68,500 shares and $127,608 as the final payment relating to
the cancellation in 1993 of options to purchase 240,000 shares.
During 1996, the Company paid the Chairman:  (i) $1,862,000 for the
cancellation in 1996 of options to purchase 121,500 shares of the
Company's common stock, plus interest at the rate of 8% per year on
such amount for a one year period (for a total of $2,011,737); (ii)
$120,700 for the federal income tax reimbursement relating to the
cancellation in 1995 of options to purchase 50,000 shares of the
Company's common stock; and (iii) $313,960 for the federal income
tax reimbursement relating to the 1996 options cancellation.  The
federal income tax reimbursements are expensed in the period when
they are incurred.



13. Commitments and Contingencies

The Company and its subsidiaries are defendants in certain legal
actions related to the normal business operations of the Company.
Management believes that the resolution of such matters will not
have a material impact on the financial statements.

14. Net Income Per Share

The following table reflects the calculation of basic and diluted
earnings per share:

                                               December 31,
                                        1997       1996      1995
                                         (amounts in thousands,
                                         except per share amounts)
Basic:
  Net income available to
   common shareholders                 $20,540    $26,938  $10,714
  Weighted average common
   stock outstanding                     4,328      4,233    4,175

  Basic earnings per share             $  4.75    $  6.36  $  2.57

Diluted:
  Net income available to
   common shareholders                  $20,540    $26,938 $10,714
  Weighted average common
   stock outstanding                     4,328      4,233   4,175
  Common stock options                      88      1,993   2,049
  Repurchase of treasury stock             (47)    (1,785) (1,882)
  Common stock and common
   stock equivalents                     4,369      4,441   4,342

  Diluted earnings per share             $4.70      $6.07   $2.47


The options held by FIC to purchase ILCO stock were excluded from the
1997 diluted EPS calculation as they were antidilutive.

15. Quarterly Financial Data (unaudited)
      (in thousands, except per share amounts)

                                Three Months       Three Months
                                  Ended              Ended
                                 March 31,          June 30,
                               1997    1996      1997    1996

Net Operating Revenue       $27,401   $53,581 $28,555   $27,836

Net Income                  $ 2,700   $18,042 $ 2,942   $ 2,936


Basic earnings per share    $  0.64   $  4.31  $  0.68  $  0.70

Diluted earnings per share  $  0.61   $  3.89  $  0.67  $  0.66



                             Three Months       Three Months
                                 Ended              Ended
                               September 30,     December 31,
                              1997     1996      1997    1996

Net Operating Revenue      $ 29,306   $29,474 $42,421   $27,353

Net Income                 $  2,837   $ 2,973 $12,061   $ 2,987


Basic earnings per share   $   0.66   $  0.71   $ 2.79  $  0.70

Diluted earnings per share  $  0.62   $  0.70  $ 2.69   $  0.68




             INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
               SCHEDULE I - SUMMARY OF INVESTMENTS OTHER THAN
                           INVESTMENTS IN RELATED PARTIES
                              December 31, 1997
                          (in thousands of dollars)



Column A                           Column B  Column C  Column D

                                                       Amount at
                                                        Which
                                                       Shown in
                                                         the
                                                       Balance
Type of Investment                   Costs    Value     Sheet
Fixed maturities available for
 sale:
United States Government and
 government agencies and
 authorities                       $ 24,556 $ 25,825  $ 25,825
States, municipalities and
 political subdivisions               4,686    5,035     5,035
Corporate securities                119,847  123,913   123,913
Mortgage-backed securities          287,747  299,689   299,689

Total fixed maturities available
 for sale                           436,836  454,462   454,462

Fixed maturities held to maturity     3,412    3,332     3,412

Total fixed maturities              440,248  457,794   457,874

Equity securities:
Public utilities                          2        2         2
Banks, trust and financial
 institutions                            31      161       161
Industrial, miscellaneous and all
 other                                   18       30        30

Total equity securities                  51      193       193

Policy loans                         53,499   53,499    53,499
Mortgage loans                       10,862   11,307    10,862
Real estate                           1,300    1,300     1,300
Short term investments              164,622  164,622   164,622

Total investments                  $670,582 $688,715  $688,350

             INTERCONTINENTAL LIFE CORPORATION (PARENT COMPANY)
         SCHEDULE II - CONDENSED FINANCIAL STATEMENTS OF REGISTRANT
                               BALANCE SHEETS
                         December 31, 1997 and 1996
                          (in thousands of dollars)




ASSETS                                      1997         1996

Short-term investments                   $    692     $  6,252

Cash and cash equivalents                      99          126

Subordinated debenture receivables
 from Investors Life Insurance
 Company of North America,
 due September 30, 1999                    27,796       38,546

Investments in and advances to
  subsidiaries                            128,305       91,601

Accounts receivable                         4,940        6,117

Property, plant and equipment, net            271          277

Other assets                                  493        1,022

  Total Assets                          $ 162,596    $ 143,941



             INTERCONTINENTAL LIFE CORPORATION (PARENT COMPANY)
         SCHEDULE II - CONDENSED FINANCIAL STATEMENTS OF REGISTRANTS
                          BALANCE SHEETS, continued
                         December 31, 1997 and 1996
                          (in thousands of dollars)


LIABILITIES AND SHAREHOLDERS' EQUITY           1997      1996
Liabilities:
Accounts payable and accrued expenses        $  2,570   $ 2,226
Senior loans                                   10,964    24,944
Deferred gain on sale of real estate              847       956
                                               14,381    28,126
Redeemable preferred stock:
 Class A preferred stock, $1 par value,
  shares authorized and issued                  5,000     5,000
 Class B preferred stock, $1 par value,
  shares authorized, and issued                15,000    15,000
                                               20,000    20,000
Redeemable preferred stock, repurchased
  and held as treasury stock                  (20,000)  (20,000)
                                                 -0-      -0-

Shareholders' Equity:

 Common stock, $.22 par value, 10,000,000
  shares authorized; 5,343,739 and 5,223,739
  shares issued, 4,331,335 and 4,232,829
  shares outstanding in 1997 and 1996,
  respectively                                  1,176     1,150
 Additional paid-in capital                     4,253     3,752
 Net unrealized appreciation of securities
  held by insurance subsidiaries                2,946     1,255
 Net unrealized gain (loss)
  on investments in fixed
  maturities available for sale held by
  insurance subsidiaries                       11,457     1,525
 Retained earnings (including $125,452 and
  $105,628 of undistributed earnings of
  subsidiaries at December 31, 1997 and 1996,
  respectively)                               129,237   108,697
                                              149,069   116,379
Common treasury stock, at cost, 687,644
  and 665,950 shares in 1997 and 1996            (854)     (564)
 Total Shareholders' Equity                   148,215   115,815
 Total Liabilities and Shareholders' Equity $ 162,596  $143,941

             INTERCONTINENTAL LIFE CORPORATION (PARENT COMPANY)
         SCHEDULE II - CONDENSED FINANCIAL STATEMENTS OF REGISTRANT,
                       STATEMENTS OF INCOME, continued
                Years Ended December 31, 1997, 1996 and 1995
                          (in thousands of dollars)


                                1997          1996        1995
Revenues charged to
 subsidiaries:
 Interest income             $  3,345      $ 4,915    $  8,236
 Other income                     131          133         134
                                3,476        5,048       8,370

Operating expenses                958        2,513       1,779
Interest expense                1,417        2,613       5,469
                                2,375        5,126       7,248

Income (loss) from
 operations                     1,101          (78)      1,122
Federal income tax
 provision (benefit)              385          (27)        393
Net income (loss) before
 equity in undistributed
 earnings from subsidiaries
 extraordinary item and
 change in accounting
 principle                        716          (51)        729

Equity in undistributed
 earnings from subsidiaries    19,824       26,989       9,985

Net Income                   $ 20,540     $ 26,938    $ 10,714

             INTERCONTINENTAL LIFE CORPORATION (PARENT COMPANY)
              SCHEDULE II - CONDENSED STATEMENTS OF REGISTRANT
                     STATEMENT OF CASH FLOWS, continued
                          (in thousands of dollars)


                                       Year ended December 31,
CASH FLOWS FROM OPERATING              1997      1996      1995
 ACTIVITIES:
Net income                          $ 20,540  $ 26,938  $ 10,714
Adjustments to reconcile net income
 to net cash provided by (used in)
 operating activities:
Amortization of deferred gain on
 sale of real estate                    (109)     (110)     (109)
Unrealized appreciation
 of equity securities
 held by insurance subsidiaries        1,691       507       180
Decrease in accounts receivable        1,023       -0-        32
Increase in investment
 in and advances to subsidiaries     (26,618)  (26,284)  (21,748)
Increase (decrease) in accounts
 payable and accrued expenses            344    (3,067)      723
Decrease in other assets                 529     1,215       640
Other                                      6         2       (87)
Net Cash used in operating
 activities                           (2,594)     (799)   (9,655)
CASH FLOWS FROM INVESTING
 ACTIVITIES:
Investments sold                       5,560       770     1,283
Net cash provided by
 investing activities                  5,560       770     1,283
CASH FLOWS FROM FINANCING
 ACTIVITIES:
Repayment of debt                    (13,980)  (34,441)   (7,200)
Payment on subordinated debenture
 payable                                 -0-       -0-      (200)
Stock options exercised                  527       244       680
Purchase of treasury stock              (290)      -0-       -0-
Payment received on subordinated
 debenture receivable                10,750    34,289    14,960
  Net cash (used in) provided by
   financing activities               (2,993)       92     8,240
Net (decrease)increase in cash           (27)       63      (132)
Cash, beginning of year                  126        63       195
Cash, end of year                  $      99   $   126  $     63

             INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                         SCHEDULE IV - REINSURANCE
            For the years ended December 31, 1997, 1996 and 1995
                          (in thousands of dollars)


                                         Ceded To     Assumed
                               Direct     Other       From Other
1997                            Amount    Companies   Companies

Life insurance in-force     $ 7,903,915  $1,636,371  $   59,009

Premium:
 Life insurance             $    23,670  $   10,035  $      114
 Accident-health insurance          809         403          37

Total                       $    24,479  $   10,438  $      151

1996

Life insurance in-force     $ 7,009,993  $1,112,318  $   18,481

Premium:
 Life insurance             $    16,863  $    8,164  $      100
 Accident-health insurance          948        (202)         31

Total                       $    17,811  $    7,962  $      131

1995

Life insurance in-force     $ 7,693,274  $  864,512  $    8,124

Premium:
 Life insurance             $    18,561  $    8,773  $      127
 Accident-health insurance        2,260        (205)         38

Total                       $    20,821  $    8,568  $      165


             INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                         SCHEDULE IV - REINSURANCE
            For the years ended December 31, 1997, 1996 and 1995
                          (in thousands of dollars)


                                            Percentage
                                Net        Of Amount
1997                           Amount        Assumed

Life insurance in-force      $6,326,553         .93%

Premium:
 Life insurance              $   13,749        0.83%
 Accident-health insurance          443        8.34%

Total                        $   14,192        1.07%

1996

Life insurance in-force      $5,916,156         .31%

Premium:
 Life insurance              $    8,799        1.15%
 Accident-health insurance        1,181        2.71%

Total                        $    9,980        1.33%

1995

Life insurance in-force      $6,836,886         .12%

Premium:
 Life insurance              $    9,915        1.24%
 Accident-health insurance        1,179        3.22%

Total                        $   11,694        6.84%



                                Exhibit Index

Exhibit            Page                Description
Number             Number


 3(a)                   Certificate of Incorporation of
                        InterContinental Life Corporation
                        filed May 22, 1969 and Amendments
                        thereto (2)

                             (i)  Amendment filed July 16, 1973

                             (ii) Amendment filed August 4, 1977

                             (iii)Amendment filed February 10, 1983

                             (iv) Amendment filed December 14, 1988

                             (v)  Amendment filed February 9, 1990

 3(b)                   By-laws of InterContinental Life
                        Corporation. (3)

 3(c)                   Articles of Incorporation of
                        InterContinental Life Corporation of
                        Texas. (15)

 3(d)                   Amendment to Articles of Incorporation
                        of InterContinental Life Corporation
                        of Texas. (15)

 3(e)                   By-Laws of InterContinental Life
                        Corporation of Texas. (15)

 3(f)                   Articles of Merger of InterContinental
                        Life Corporation and InterContinental
                        Life Corporation of Texas. (15)

 3(g)                   Plan and Agreement of Merger Between
                        InterContinental Life Corporation and
                        InterContinental Life Corporation of
                        Texas. (15)

10(a)                   Registrant's Incentive Stock Option
                        Plan. (1)

10(m)                   Lease dated December 20, 1085 between
                        Registrant and Parker Road Associates
                        for the rental of 40 Parker Road,
                        Elizabeth, New Jersey. (4)

10(o)                   (i)  Grid Note dated December 18, 1985
                             in the amount of $800,000 made by
                             the Registrant and payable to
                             Midlantic National Bank.  (4)

                             (ii) Demand Note dated December 18,
                                  1985 in the amount of $491,165.03
                                  made by Registrant and payable to
                                  Midlantic National Bank.  (4)

10(ah)                       Credit Agreement for $125,000,000
                             dated as of December 28, 1988 among
                             Registrant and certain banks
                             identified therein. (5)

10(ai)                       Note Purchase Agreement dated as of
                             December 31, 1988 between Registrant
                             and a Rhode Island based
                             insurance/financial services company.
                             A Note Purchase Agreement in
                             substantially identical form was
                             executed with seven other entities
                             identified in these exhibit. (5)

10(aj)                       Class A Preferred Stock Purchase
                             Agreement dated as of December 1, 1988
                             between Registrant and Insurance
                             Company of North America. (5)

10(ak)                       Class B Preferred Stock Purchase
                             Agreement dated as of December 1, 1988
                             between Registrant and a Rhode Island
                             based insurance/financial services
                             company.  A Class B Preferred Stock
                             Purchase Agreement in substantially
                             identical form was executed with seven
                             other entities identified in this
                             exhibit.  (5)

10(al)                       Pledge Agreement dated as of December
                             28, 1988 between Registrant and The
                             First National Bank of Chicago, as
                             Agent.  (5)

10(am)                       Surplus Debenture dated as of December
                             28, 1988 in the amount of $140,000,000
                             made by Standard to Registrant.  (5)

10(an)                       Warrant Agreement dated as of December
                             29, 1988 between Registrant and a
                             Connecticut based insurance/financial
                             services company.  A Warrant Agreement
                             in substantially identical form was
                             executed with seven other entities.
                             (5)

10(aq)                       Registrant's Defined Benefit Pension
                             Plan, effective as of January 1, 1988.

10(ar)                       Registrant's Employee Stock Purchase
                             Plan, effective as of August 25, 1989.
                             (6)

10(as)                       Registrant's Non-Qualified Stock
                             Option Plan.  (6)

10(at)                       Exchange and Amendment Agreement dated
                             July 30, 1990 between Registrant and
                             the holders of its Class A Preferred
                             Stock and its Class B Preferred Stock.
                             (7)

10(au)                       Amendment dated July 30, 1990 to
                             Senior Loan Agreement among the
                             Registrant and certain banks
                             identified therein.  (7)

10(av)                       InterCreditor Agreement dated June 12,
                             1991, among Investors Life Insurance
                             Company of North America, Investors
                             Life Insurance Company of California,
                             Merrill Lynch Insurance Group, Inc.
                             and Merrill Lynch & Co., Inc.  (8)


10(aw)                       Note dated June 12, 1991 in the amount
                             of $22.5 million made by Family Life
                             Corporation in favor of Investors Life
                             Insurance Company of North America.
                             (8)

10(ax)                       Note dated June 12, 1991 in the amount
                             of $2.5 million made by Financial
                             Industries Corporation in favor of
                             Investors Life Insurance Company of
                             California.  (8)

10(ay)                       InterCreditor Agreement among
                             Investors Life Insurance Company of
                             North America, Investors Life
                             Insurance Company of California and
                             the Agent under the Credit Agreement
                             dated as of June 12, 1991.  (8)

10(az)                       Option Agreement by Financial
                             Industries Corporation in favor of
                             Investors Life Insurance Company of
                             North America and Investors Life
                             Insurance Company of California.  (8)

10(aaa)                      Hotel Lease Agreement dated as of
                             August 22, 1991 between Investors Life
                             Insurance Company of North America and
                             FIC Realty Services, Inc.  (9)

10(aab)                      Management Agreement dated as of
                             September 4, 1991 between Investors
                             Life Insurance Company of North
                             America and FIC Property Management,
                             Inc.  (9)

10(aac)                      Amended and Restated Credit Agreement
                             dated January 29, 1993 among the
                             Registrant and certain banks
                             identified therein.  (10)

10(aad)                      Amended and Restated Pledge Agreement
                             dated January 29, 1993 between the
                             Registrant and the agent bank named
                             therein.  (10)

10(aae)                      Stock Option Agreement dated March 8,
                             1986 between Registrant and Financial
                             Industries Corporation.  (10)

10(aaf)                      Surplus Debenture dated as of November
                             13, 1986 in the amount of $15,000,000
                             made by New Standard to Registrant.
                             (10)

10(aag)                      Terms and Conditions of Employment
                             Contracts of James M. Grace, Eugene E.
                             Payne and Joseph F. Crowe approved by
                             Registrant's Board of Directors on May
                             16, 1991,  ((10)

10(aah)                      Letter agreement and addendum dated
                             July 23, 1992 between Investors Life
                             Insurance Company of North America and
                             Mr. and Mrs. Theodore A. Fleron.  (10)

10(aai)                      Letter agreement dated October 15,
                             1992 between Roy F. Mitte and
                             Registrant evidencing surrender and
                             cancellation of stock options.  (10)

10(aaj)                      Note dated July 30, 1993 in the amount
                             of $30 million made by Family Life
                             Corporation in favor of Investors Life
                             Insurance Company of North America.
                             (11)

10(aak)                      Note dated July 30, 1993 in the amount
                             of $4.5 million made by Family Life
                             Insurance Investment Company in favor
                             of Investors Life Insurance Company of
                             North America.  (11)

10(aal)                      Amendment No. 1 dated July 30, 1993
                             between Family Life Corporation and
                             Investors Life Insurance Company of
                             North America amending $22.5 million
                             note.  (11)

10(aam)                      Cancellation of Stock Option Agreement
                             dated  October 21, 1993 between
                             Registrant and Roy F. Mitte.  (11)

10(aan)                      Waiver and Amendment Agreement dated
                             as of July 23, 1993 among the
                             Registrant and certain banks
                             identified therein.  (12)

10(aao)                      Amendment Agreement dated as of
                             December 20, 1993 among the Registrant
                             and certain banks identified therein.
                             (12)

10(aap)                      Amendment Agreement dated as of March
                             12, 1994 among the Registrant and
                             certain banks identified therein. (12)

10(aaq)                      Amendment Agreement dated as of
                             December 22, 1994 among the Registrant
                             and certain banks identified therein.
                              (12)

10(aar)                      Amendment Agreement dated as of
                             February 10, 1995 among the Registrant
                             and certain banks identified therein.
                             (12)


10(aas)                      Data Processing Agreement dated as of
                             November 30, 1994 between
                             InterContinental Life Insurance
                             Company and FIC Computer Services,
                             Inc.  (12)



10(aat)                      Data Processing Agreement dated as of
                             November 30, 1994 between Investors
                             Life Insurance Company of North
                             America and FIC Computer Services,
                             Inc.  (12)

10(aau)                      Data Processing Agreement dated as of
                             November 30, 1994 between Family Life
                             Insurance Company and FIC Computer
                             Services, Inc.  (12)

10(aav)                      Lease Agreement dated as of September
                             30, 1994 between FIC Realty Services,
                             Inc. and Atrium Beverage Corporation.
                             (12)

10(aaw)                      Management Agreement dated as of
                             September 30, 1994 between HCD Austin
                             Corporation as agent for FIC Realty
                             Services, Inc. and Atrium Beverage
                             Corporation. (12)

10(aax)                      Amendment Agreement dated as of August
                             8, 1995 among the Registrant and
                             certain banks identified therein. (13)

10(aay)                      Amendment Agreement dated as of
                             December 15, 1995 among the Registrant
                             and certain banks identified therein.
                             (13)

10(aaz)                      Agreement of Sale dated as of
                             September 5, 1995 between Omni
                             Congress Joint venture as Buyer and
                             Investors Life Insurance Company of
                             North America as Seller, with
                             exhibits, amendments and assignment.
                             (13)

10(aaaa)                     Amendment No. 2 dated December 12,
                             1996, effective June 12, 1996 to the
                             note dated June 12, 1991 in the amount
                             of $22.5 million made by Family Life
                             Corporation in favor of Investors Life
                             Insurance Company of North America.
                             (14)

10(aaab)                     (i)  Amendment No. 1 dated December
                                  12, 1996, effective June 12, 1996
                                  to the note dated June 12, 1991
                                  in the amount of $2.5 million
                                  made by Financial Industries
                                  Corporation in favor of Investors
                                  Life Insurance Company of
                                  California.(14)

                             (ii) Amendment No. 1 dated December
                                  12, 1996, effective June 12, 1996
                                  to the "payment in kind"
                                  provisions of the note dated June
                                  12, 1991 in the amount of $2.5
                                  million made by Financial
                                  Industries Corporation in favor
                                  of Investors Life Insurance
                                  Company of North America. (14)

10(aaac)                     Amendment No. 1 dated December 12,
                             1996, effective June 12, 1996 to the
                             note dated July 30, 1003 in the amount
                             of $30 million made by Family Life
                             Corporation in favor of Investors Life
                             Insurance Company of North
                             America.(14)

10(aaad)                     Amendment No. 1 dated December 12,
                             1996, effective June 12, 1996 to the
                             note dated July 30, 1993 in the amount
                             of $4.5 million made by Family Life
                             Insurance Investment Company in favor
                             of Investors Life Insurance Company of
                             North America. (14)

10(aaae)                     Amendment Agreement dated as of April
                             24, 1996 between Registrant and
                             certain banks identified therein.(14)

10(aaaf)                     Waiver Agreement dated as of December
                             12, 1996 between Registrant and
                             certain banks identified therein.(14)

10(aaag)                     Amendment Agreement dated December 12,
                             1996 to the Option Agreement by
                             Financial Industries Corporation in
                             favor of Investors Life Insurance
                             Company of North America and Investors
                             Life Insurance Company of California.
                             (14)

10(aaah)           Ex-9      Amendment and Waiver Agreement dated
                             as of March 31, 1997 among the
                             Registrant and certain banks
                             identified therein.

10(aaai)           Ex-19     Amendment and Waiver Agreement dated
                             as of December 9, 1997 among the
                             Registrant and certain banks
                             identified therein.

21                 Ex-25     Subsidiaries of the Registrant.

23                 Ex-26     Consent of Price Waterhouse, LLP.



 (1)  Filed with the Registrant's Annual Report of Form 10-K for the
      fiscal year ended December 31, 1983, Commission File No. 0-7290,
      and incorporated herein by reference.

 (2)  Filed with the Registrant's Registration Statement on Form S-8
      (Registration No. 2085333) and incorporated herein by reference;
      except Amendment filed December 14, 1988 (item (iv)), which was
      filed with Registrant's Current Report of Form 8-K dated January
      12, 1989, and incorporated herein by reference; and Amendment
      filed February 9, 1990, which was filed with Registrant's Annual
      Report on Form 10-K for the fiscal year ended December 31, 1989,
      and incorporated herein by reference.

 (3)  Filed with the Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 1984 and incorporated herein by
      reference.

 (4)  Filed with the Registrant's Annual Report of Form 10-K for the
      fiscal year ended December 31, 1985 and incorporated herein by
      reference.

 (5)  Filed with Registrant's Annual Report of Form 10-K for the
      fiscal year ended December 31, 1988, and incorporated herein by
      reference,

 (6)  Filed with Registrant;s Annual Report on Form 10-K for the
      fiscal year ended December 31, 1989, and incorporated herein by
      reference.

 (7)  Filed with Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 1990, and incorporated herein by
      reference.

 (8)  Filed with Financial Industries Corporation's Current Report on
      Form 8-K dated June 25, 1991, and incorporated herein by
      reference.

 (9)  Filed with Registrant's Annual Report on Form 10-K for the
      fiscal year ended
      December 31, 1991, and incorporated herein by reference.

(10)  Filed with Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 1992, and incorporated herein by
      reference.

(11)  Filed with Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 1993, and incorporated herein by
      reference.

(12)  Filed with Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 1994, and incorporated herein by
      reference.

(13)  Filed with Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 1995, and incorporated herein by
      reference.

(14)  Filed with Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 1996, and incorporated herein by
      reference.

(15)  Filed with Registrant's Quarterly Report on Form 10-Q for the
      fiscal quarter ended June 30, 1997, and incorporated herein by
            reference.
<PAGE>
Exhibit 10(aaah)
                     INTERCONTINENTAL LIFE CORPORATION
                      AMENDMENT AND WAIVER AGREEMENT

      This Amendment and Waiver Agreement (the "Agreement") is entered
into as of March 31, 1997 by and among InterContinental Life
Corporation (the "Company"), the undersigned lenders (the "Lenders")
and The First National Bank of Chicago, as agent for the Lenders (the
"Agent").

                           W I T N E S S E T H :

      WHEREAS, the Company, the Lenders and the Agent are parties to
that certain Amended and Restated Credit Agreement dated as of
January 29, 1993 (as amended, the "Credit Agreement");

      WHEREAS, the Company, the Lenders and the Agent desire to amend
the Credit Agreement in connection with the acquisition (the "State
Auto Acquisition") by Investors Life'Insurance Company of Indiana
("Investors-NA") of State Auto Life Insurance Company ("State Auto"),
as hereinafter set forth;

      WHEREAS, the Company has requested that the Lenders and Agent
amend the Credit Agreement and waive compliance with certain
provisions of the Credit Agreement in connection with (i) the State
Auto Acquisition and (ii) the purchase in cash by the Company of
25,000 shares of its common stock for an amount per share equal to
the existing market price (as quoted on the NASDAQ National Market
System) at the time of such purchase, which shares of common stock,
when acquired by the Company, shall be used solely by the Company to
make a contribution to the InterContinental Life Corporation
Employees Savings and Investment Plan (the "Plan") for allocation of
matching contributions to participants under the Plan, all as
hereinafter set forth;

      NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

1.   Defined Terms.     Capitalized terms used herein and not otherwise
defined herein shall have the meanings attributed to such terms in
the Credit Agreement.

2.    Amendment to Credit Agreement. The Credit Agreement is amended
as follows:

      (a)          All references to "Meridian" contained in the Credit
                   Agreement and the Loan Documents (as defined in Section
                   7(a) below) shall be deleted and the term "Investors-IN"
                   shall be inserted in lieu thereof;

      (b)          Article I of the Credit Agreement is amended by deleting
                   the definition of "Meridian" contained therein;


(c)   Article I of the Credit Agreement is amended by inserting
      immediately before the definition of "Investors-NA" the
      following new definition:

      "Investors-IN" means Investors Life Insurance Company of
      Indiana (formerly known as Meridian Life Insurance Company prior
      to its name change to Investors Life Insurance Company of
      Indiana) , an Indiana corporation which became upon consummation
      of the Meridian Acquisition, and continues to be, a direct
      Wholly-owned Subsidiary of Investors-North America."

(d)   Article I of the Credit Agreement is amended by inserting
      immediately after the definition of "Modified IRIS Tests" the
      following new definition:

      "Modified IRIS (Investors-IN) Tests" means the Modified IRIS
      Tests other than (i) the net change in capital and surplus test,
      (ii) the gross change in capital and surplus test, (iii) the
      change in premium test and (iv) the change in reserving ratio
      test."

(e)   Article I of the Credit Agreement is amended by inserting
      immediately before the definition of "Statutory Capital" the
      following new definitions:

      "State Auto" means State Auto Life Insurance Company, an Ohio
      corporation which, upon consummation of the State Auto
      Acquisition, shall be merged with and into Investors-IN pursuant
      to which Investors-IN shall be the surviving corporation."

      "State Auto Acquisition" means the acquisition by Investors-IN
      of all of the capital stock of State Auto for an aggregate
      purchase price not to exceed $14 million."

(f)   Section 2.3 (c) of the Credit Agreement is hereby amended to
      delete the reference to "July 1, 1999" contained in Section
      2.3(c) and to insert "October 1, 1998" in lieu thereof.

(g)   Section 2.4 of the Credit Agreement is hereby amended to delete
      the entire paragraph (a) of Section 2.4 and to insert the
      following in lieu thereof:

      "(a) Intentionally omitted."

(h)   Section 2.4(c) of the Credit Agreement is hereby deleted in its
      entirety and the following is inserted in lieu thereof:




                                    -2-

 "(c) On April 1, 1993, the Company shall make a mandatory payment on
the Advances outstanding equal to $26,000,000. In addition, the
Company shall make quarterly installments of principal set forth
below payable on the first day of each calendar quarter beginning
April 1, 1994:

                                            Aggregate
                             Quarterly      Payments
Period                       Payments       in Period

4/l/94-3/31/95               $4,500,000     $18,000,000
4/l/95-3/31/96               $4,500,000     $18,000,000
4/l/96-3/31/97               $4,500,000     $18,000,000
4/1/97                       $0             $0
7/l/97                       $2,000,000     $ 2,000,000
10/l/97-9/30/98              $3,700,000     $14,800,000
10/1/98                      $3,644,000     $ 3,644,000"

(i)   Section 2.11 of the Credit Agreement is hereby amended to delete
      the reference to "July 1, 1999" contained in Section 2.11 and to
      insert "October 1, 1998" in lieu thereof.

(j)   Section 6.4.1 of the Credit Agreement is hereby deleted in its
      entirety and the following is inserted in lieu thereof:

      "6.4.1. Adiusted Capital and Surplus. The Company will not
      permit at any time the total Adjusted Capital and Surplus of
      each of the Insurance Subsidiaries set forth below to be less
      than the amount(s) set forth below opposite the name of each
      such insurance Subsidiary:

                                    -3-
                                        Amount of Adjusted
Insurance Subsidiary                   Capital and Surplus

Investors-North America                $56,500,000

ILIC                                   $ 8,500,000

Investors-IN                           $ 7,000,000

provided, however, that if any of the mergers set forth below are
consummated, the surviving entity shall maintain at all times total
Adjusted Capital and Surplus at least equal to:

                                            Amount of Adjusted
Merger                                      Capital and Surplus

ILIC and Investors-North
America                                        $56,500,000


(1)   Section 6.4.6 of the Credit Agreement is hereby deleted in its
      entirety and the following is inserted in lieu thereof:

      "6.4.6. IRIS Tests. Subject to the last sentence of this Section
      6.4.6, the Company will cause its Insurance Subsidiaries to
      maintain at all times the NAIC ratios in respect of net gain to
      total income, investment yield, real estate to capital and
      surplus and surplus relief within the acceptable range
      prescribed by NAIC for at least 7 of the 10 Modified IRIS Tests
      in the case of ILIC and Investors-North America. Subject to the
      last sentence of this Section 6.4.6, the Company will cause
      Investors-IN to maintain the NAIC ratios in respect of net gain
      to total income, investment yield, real estate to capital and
      surplus and surplus relief within the acceptable range
      prescribed by NAIC (i) for at least 7 of the 10 Modified IRIS
      Tests at all times prior to the consummation of the State Auto
      Acquisition and at all times after March 31, 1998 and (ii) at
      all times during the period commencing on the date of
      consummation of the State Auto Acquisition and ending on March
      31, 1998, for at least 4 of the 6 Modified IRIS (Investors-IN)
      Tests. Solely for purposes of computations under this Section,
      if any merger of Insurance Subsidiaries (including the merger of
      Investors-North America and Investors Life Insurance Company of
      California) occurs during the twelve month period preceding



                                    -4-

      any date as of which compliance with this Section 6.4.6 is
      determined, such merger shall be deemed to have occurred
      immediately prior to the first day of such twelve month period."

3.    Waiver re State Auto Acquisition. The Lenders hereby waive any
violation of the Credit Agreement and any default created thereby
attributable solely to the Company's breach of Section 2.4(c) of the
Credit Agreement as in effect prior to the effectiveness of Section
2 hereunder by reason of the Company's failure to make the payment
required by Section  2.4(c) of the Credit Agreement as in effect on
the date hereof, such waiver to be effective only for the period
commencing on March 31, 1997 and ending on the earlier of (x) the
date on which all conditions precedent set forth in Section 5(a)
hereof shall have been met (at which point Section 2 hereof shall be
effective), and (y) either (1) April 30, 1997 if a definitive
purchase agreement in  connection with the State Auto Acquisition is
not executed by Investors-IN prior to April 30, 1997 or (2) if it is
ultimately determined that the State Auto Acquisition will not be
consummated for any reason, then on the date of such  determination
(at which point for the purposes of this clause  (y) the Company
shall be required to make the payment set forth in Section 5(b)
hereof); provided, however, the waiver set forth in this sentence
shall only be effective if beginning on the date hereof the Company
makes prepayments on the Advances in the amounts and on the dates
called for by Section 2(h) of this Agreement prior to the occurrence
of an event described by subclause (1) or (2) of this Section 3. The
Lenders hereby further waive any violation of the Credit Agreement
and any default created thereby attributable solely to the Company's
breach of Section 6.13 of the Credit Agreement by reason of the
merger of State Auto into Investors-IN. The Lenders further hereby
waive any violation of the Credit Agreement and any Default created
thereby attributable solely to the Company's breach of Section
6.16(b) of the Credit Agreement by reason of the State Auto
Acquisition. The Lenders further hereby waive any violation  of the
Credit Agreement and any Default created thereby  attributable solely
to the Company's breach of Section 7.24  of the Credit Agreement by
reason of the failure of  Investors-NA (as successor To Standard) to
make a prepayment  of the Standard Surplus Debenture in the amount of
$4,700,000  anticipated to be made on or before December 31, 1997,
which  amount and date were specified on the Compliance Certificate
for the period ending December 31, 1996 pursuant to Section 6.4.2.
The waivers set forth in this Section 3 are only applicable and shall
only be effective in this specific instance and for the specific
purpose for which made or given.



                                    -5-

4.  Waiver re Purchase by the Company of its Common Stock.     The
Lenders hereby waive any violation of the Credit Agreement and any
Default created thereby attributable solely to the Company's breach
of Section 6. 11 of the Credit Agreement by reason of the purchase in
cash by the Company of 25,000 shares of its common stock for an
amount per share equal to the existing market price (as quoted on the
NASDAQ National Market System) at the time of such purchase, so long
as such shares of common stock, when acquired by the Company, shall
be used solely by the Company to make a contribution to the Plan for
allocation of matching contributions to participants under the Plan.
The waiver set forth in this Section 4 is only applicable and shall
only be effective in this specific instance and for the specific
purpose for which made or given.

5.   Conditions Precedent to Sections 2 and 3; Repayment if State
Auto Acquisition not Consummated.  (a)  Sections 2 and 3 of this
Agreement shall not become effective unless and until the Company has
furnished, or caused to be furnished, to the Agent, with sufficient
copies for each Lender, the following:

      (i)  A  consent  from  FIC,  in the form of Exhibit A attached
      hereto.

      (ii) Copies, certified by the Secretary or Assistant Secretary
      of the Company, of its Board of Directors resolutions
      authorizing   the  execution  of  this Agreement.

      (iii)   An incumbency certificate, executed by the Secretary or
      Assistant Secretary of the Company, which shall identify by name
      and title and bear the signature of the officers of the Company
      authorized to sign this Agreement, upon which certificate each
      Lender shall be entitled to rely until informed of any change in
      writing by the Company.

      (iv) Evidence satisfactory to the Agent and its counsel that the
      State Auto Acquisition has been consummated.

      (b)  In the event that a definitive  purchase  agreement in
connection with the State  Auto  Acquisition is not executed by
Investors-In prior to April 30, 1997 or in the event it ultimately
determined that the State Auto Acquisition will not be consummated
for any  reason, then Sections 2 and 3 of  this  Agreement shall not
become effective,  and  the  Company  shall promptly  make a
mandatory prepayment on the Advances in an amount equal to the
difference of  (i) prepayments that  would  have  been required to
have been paid by Section 2.4(c) of  the  Credit  Agreement  as  in
effect  on  the date hereof  for



                                    -6-

the period commencing on the date hereof and ending on either April
30, 1997 or such determination date, whichever is applicable, minus
(ii) prepayments paid by the Company pursuant to the proviso
contained in the first sentence of Section 3 hereof, together with
all accrued interest thereon.

6.   Conditions Precedent to Section 4.  Section 4 of this Agreement
shall not become effective unless and until the Company has
furnished, or caused to be furnished, to the Agent, with sufficient
copies for each Lender, the items required by clauses (i), (ii) and
(iii) of Section 5(a) hereof.

7.   Representation and Warranty.   The Company hereby
represents and warrants to the Lenders that after giving effect to
the amendment and waivers herein contained (i) all of the
representations and warranties contained in the Credit Agreement are
true and correct as of the date hereof, (ii) no Default or Unmatured
Default exists or is continuing and (iii) the Company has performed
all the agreements on its part to be performed prior to the date
hereof as set forth in the Credit Agreement.

8.   Effectiveness of Amendment and Waivers. This Agreement shall
become effective as of the date first above written upon receipt by
the Agent of counterparts of this Agreement duly executed by the
Company and the Required Lenders.

9.    Reference to and Effect on the Credit Agreement

      (a) Upon the effectiveness of Sections 2, 3 and 4 hereof, on or
      after the date hereof each reference in the Credit Agreement to
      "this Agreement," "hereunder," "hereof," "herein" or words of
      like import and each reference to the Credit Agreement in the
      Notes and all other documents (the "Loan Documents") delivered
      in connection with the Credit Agreement shall mean and be a
      reference to the Credit Agreement as amended hereby.

      (b) Except as specifically amended above, all of the terms,
      conditions and covenants of the Credit Agreement and all other
      Loan Documents shall remain unaltered and in full force and
      effect and shall continue to be binding upon the Company in all
      respects and are hereby ratified and confirmed.

      (c) The execution, delivery and effectiveness of this Agreement
      shall not, except as expressly provided herein, operate as a
      waiver of (i) any right, power or remedy of the Lenders or the
      Agent under the Credit Agreement or any of the Loan Documents,
      or (ii) any



                                    -7-

     Default  or  Unmatured  Default  under  the  Credit Agreement.

10. Costs, Expenses and Taxes. The Company agrees to pay on demand
all costs and expenses of the Agent in connection with the
preparation, execution and delivery of this Agreement, including the
reasonable fees and out-of-pocket expenses of counsel for the Agent
with respect thereto.

11. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.

12. Execution in Counterparts.     This Agreement may be executed in
any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute
one and the same agreement.


                                     -8-

    IN WITNESS WHEREOF, the Company, the undersigned Lenders and the
Agent have executed this Agreement as of the date first above
written.

                                  INTERCONTINENTAL LIFE CORPORATION

                                  By: /s/ Roy F. Mitte

                                  Title:President


                                  THE FIRST NATIONAL BANK OF CHICAGO,
                                    Individually and as Agent

                                  By:  /s/

                                  Title:


                                  BARCLAYS BANK, PLC

                                  By:  /s/

                                  Title:


                                  FIRST UNION NATIONAL BANK OF NORTH
                                  CAROLINA

                                  By: /s/

                                  Title:


                                  FLEET NATIONAL BANK OF CONNECTICUT

                                  By: /s/

                                  Title:


                                  CORESTATES PHILADELPHIA  NATIONAL
                                  BANK N.A.

                                  By: /s/

                                  Title:

                             -9-

                     CONSENT OF GUARANTOR


Financial Industries Corporation, as guarantor under the Amended and
Restated Guaranty dated January 29, 1993 (the "Guaranty") in favor of
the Lenders party to the Amended and Restated Credit Agreement dated
as of January 29, 1993 (as amended, the "Credit Agreement") hereby
consents to the Amendment Agreement dated as of March 31, 1997 and
hereby confirms and agrees that the Guaranty is, and shall continue
to be, in full force and effect and is hereby confirmed and ratified
in all respects.

This Consent is executed and delivered as of March 31, 1997.




                                  FINANCIAL INDUSTRIES CORPORATION


                                  By: /s/ Roy F. Mitte

                                  Title: Chairman, President and
                                         Chief Executive Officer


                                 -10-

                          Exhibit 10(aaai)
                     INTERCONTINENTAL LIFE CORPORATION
                             WAIVER AGREEMENT


      This Waiver Agreement (the "Agreement") is entered into as of
December 9, 1997 by and among InterContinental Life Corporation (the
"Company"), the undersigned lenders (the "Lenders") and The First
National Bank of Chicago, as agent for the Lenders (the "Agent").

                           W I T N E S S E T H :

      WHEREAS, the Company, the Lenders and the Agent are parties to
that certain Amended and Restated Credit Agreement dated as of
January 29, 1993 (as amended, the "Credit Agreement");

      WHEREAS, the Company, the Lenders and the Agent desire to waive
compliance with certain provisions of the Credit Agreement specified
herein in connection with the sale and transfer by ILIC and Investors
- North America of their respective accident, health and disability
insurance policies issued in connection therewith (the "Transferred
Policies") to United Teacher Associates Insurance Company ("United")
pursuant to which, among other things, the Company shall make a cash
payment of $1,050,000 to United, and United shall purchase, acquire,
assume and reinsure the contractual obligations and risks under the
Transferred Policies, all as set forth in (i) that certain Agreement
for Insurance to be entered into by and among United, on the one
hand, and Investors - North America, ILIC, and Family Life Insurance
Company ("FLIC", and together with Investors - North America and
ILIC, the "Transferee Companies"), on the other hand, the form of
which is attached hereto as Exhibit A (the "Agreement for
Reinsurance"), (ii) that certain Coinsurance Reinsurance Agreements
to be entered into by and between United and each of the Transferee
Companies, the form of which is attached hereto as Exhibit B (the
"Coinsurance Agreement"), and (iii)  that certain Assumption
Reinsurance Agreement to be entered into by and among United and the
Transferee Companies, the form of which is attached hereto as Exhibit
C (the "Assumption Agreement", and together with the Agreement for
Reinsurance  and  the Coinsurance  Agreement, the "Transfer
Agreements"), all as hereinafter set forth;

      WHEREAS, the Company, the Lenders and Agent desire to waive
compliance with certain provisions of the Credit Agreement in
connection with (i) the redomestication of ILIC from the State of New
Jersey to State of Indiana, (ii) immediately after such
redomestication, the merger of Investors-Indiana with and into ILIC,
pursuant to which ILIC shall be the surviving entity, all of
hereinafter set forth; and (iii) the cancellation by the Company of
that certain loan in the amount of approximately $300,000 made by the
Company in 1988 to the InterContinental Life Corporation Employee
Stock Ownership Plan.

      NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

1.    Defined Terms.         Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to such
terms in the Credit Agreement.

2.   Waiver. The Lenders hereby waive any violation of the Credit
Agreement and any default created thereby attributable solely to the
Company's breach of Section 6.4.7 of the Credit Agreement by reason
of the fact United will undertake reinsurance obligations under the
Transfer Agreements with respect to the Transferred Agreements at a
time in which United is rated B+ by A.M. Best & Co.(and not A or
better). The Lenders hereby further waive any violation of the Credit
Agreement and any default created thereby attributable solely to the
Company's breach of Section 6.5 of the Credit Agreement by reason of
the fact that upon effectiveness of the transactions contemplated
under the Transfer Agreements, Investors - North America and ILIC
will no longer conduct business in the accident, health and
disability insurance businesses. The Lenders hereby further waive any
violation so and so forth of the Credit Agreement and any default
created thereby attributable solely to the breach of Section 6.5 of
the Credit Agreement by reason of the redomestication of ILIC from
the State of New Jersey to the State of Indiana. The Lenders hereby
further waive any violation of the Credit Agreement and any default
created thereby attributable solely to the breach of Section 6.13 of
the Credit Agreement by reason of the merger of Investors-Indiana
with and into ILIC, pursuant to which ILIC shall be the surviving
entity. The waivers set forth in this Section 2 are only applicable
and shall only be effective in this specific instance and for the
specific purpose for which made or given. The Lenders hereby further
waive any violation of the Credit Agreement and any default created
thereby attributable solely to the breach of Section 6.21 of the
Credit Agreement by reason of the cancellation by the Company of that
certain loan in the amount of approximately $300,000 made by the
Company in 1988 to the InterContinental Life Corporation Employee
Stock Ownership Plan.

3.   Conditions Precedent to Section 2.  Section 2 of this Agreement
shall not become effective unless and until the Company has
furnished, or caused to be furnished, to the Agent, with sufficient
copies for each Lender, the following:

      (a) Fully executed copies of each of the Transfer Agreements,
      providing for the sale and transfer of the Transferred Policies
      to United and for the Cash Payment and containing substantially
      all of the other terms set forth in, and each substantially in
      the respective form of, Exhibit A, B and C attached hereto
      (except for those changes which, in the reasonable discretion of
      the Agent, do not adversely affect

                               -2-

      (i) the ability of the Company to perform its obligations under
      the Credit Agreement and (ii) the rights of the Agent and the
      Lenders under the Credit Agreement).

      (b) A consent from FIC, in the form of Exhibit D attached
      hereto.

      (b) Copies, certified by the Secretary or Assistant Secretary of
      the Company, of its Board of Directors resolutions authorizing
      the execution of this Agreement.

      (c) An incumbency certificate, executed by the Secretary or
      Assistant Secretary of the Company, which shall identify by name
      and title and bear the signature of the officers of the Company
      authorized to sign this Agreement, upon which certificate each
      Lender shall be entitled to rely until informed of any change in
      writing by the Company.

4.    Representation and Warrantv. The Company hereby represents and
warrants to the Lenders that after giving effect to the waivers
herein contained (i) all of the representations and warranties
contained in the Credit Agreement are true and correct as of the date
hereof, (ii) no Default or Unmatured Default exists or is
continuing-and (iii) the Company has performed all the agreements on
its part to be performed prior to the date hereof as set forth in the
Credit Agreement.

5.    Effectiveness of Waivers.   This Agreement shall become
effective as of the date first above written upon receipt by the
Agent of counterparts of this Agreement duly executed by the Company
and the Required Lenders.

6.    Reference to and Effect on the Credit Agreement.

      (a) Upon the effectiveness of Sections 2 hereof, on or after the
      date hereof each ref erence in the Credit Agreement to "this
      Agreement," "hereunder," "hereof," "herein" or words of like
      import and each reference to the Credit Agreement in the Notes
      and all other documents (the "Loan Documents") delivered in
      connection with the Credit Agreement shall mean and be a
      reference to the Credit Agreement after giving effect to the
      waivers effected hereby.

      (b) Except as specifically waived above, all of the terms,
      conditions and covenants of the Credit Agreement and all other
      Loan Documents shall remain unaltered and in full force and
      effect and shall continue to be binding upon the Company in all
      respects and are hereby ratified and confirmed.

      (c) The execution, delivery and effectiveness of this Agreement
      shall not, except as expressly provided herein, operate as a
      waiver of (i) any right, power or remedy of the

                                -3-
     Lenders or the Agent under the Credit Agreement or any of the
     Loan Documents, or (ii) any Default or Unmatured Default under
     the Credit Agreement.

7.    Costs, Expenses and Taxes.   The Company agrees to pay on demand
all costs and expenses of the Agent in connection with the
preparation, execution and delivery of this Agreement, including the
reasonable fees and out-of-pocket expenses of counsel for the Agent
with respect thereto.

8.   CHOICE OF LAW.   THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.

9.   Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by dif f erent parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same agreement.

                                 -4 -

      IN WITNESS WHEREOF, the Company, the undersigned Lenders and the
Agent have executed this Agreement as of the date first above
written.

                                  INTERCONTINENTAL LIFE CORPORATION

                                  By:/s/ Roy F. Mitte
                                  Title: President

                                  THE FIRST NATIONAL BANK OFCHICAGO,
                                  Individually and as Agent

                                  By:/s/

                                  Title:


                                  BARCLAYS BANK, PLC

                                  By:/s/

                                  Title:


                                  FIRST UNION NATIONAL BANK

                                  By:/s/

                                  Title:


                                  FLEET NATIONAL BANK OF CONNECTICUT

                                  By:/s/

                                  Title:


                                  CORESTATES PHILADELPHIA NATIONAL
                                  BANK N.A.

                                  By:/s/

                                  Title:


                                -5-

                      CONSENT OF GUARANTOR


Financial Industries Corporation, as guarantor under the Amended and
Restated Guaranty dated January 29, 1993 (the "Guaranty") in favor of
the Lenders party to the Amended and Restated Credit Agreement dated
as of January 29, 1993 (as amended, the "Credit Agreement") hereby
consents to the Amendment Agreement dated as of December 9, 1997 and
hereby confirms and agrees that the Guaranty is, and shall continue
to be, in full force and effect and is hereby confirmed and ratified
in all respects.

This Consent is executed and delivered as of December 9, 1997.




                                  FINANCIAL INDUSTRIES CORPORATION


                                  By: /s/ Roy F. Mitte

                                  Title: Chairman, President and
                                         Chief Executive Officer


                                 EXHIBIT 21

                         SUBSIDIARIES OF REGISTRANT

              Investors Life Insurance Company of North America

                 Investors Life Insurance Company of Indiana

                         ILG Securities Corporation

                            ILG Sales Corporation

                     InterContinental Growth Plans, Inc.

                    InterContinental Life Agency, Inc. *



       *Wholly-owned subsidiary of InterContinental Growth Plans, Inc.



                                 EXHIBIT 23


                     CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 (No. 33-71074) of InterContinental
Life Corporation of our report dated March 27, 1998 appearing on page
F-2 of this Form 10-K.




PRICE WATERHOUSE LLP
Dallas, Texas
March 27, 1998